Newmark Security plc Annual Report 2007

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FY2007 Annual Report · Newmark Security plc

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Report and Financial Statements

Year ended 30 April 2007

INDEX

DIRECTORS, SECRETARY AND ADVISERS

CHAIRMAN’S STATEMENT

REPORT OF THE DIRECTORS

REPORT OF THE REMUNERATION COMMITTEE

REPORT OF THE INDEPENDENT AUDITORS

FINANCIAL STATEMENTS

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

COMPANY BALANCE SHEET

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

NOTICE OF ANNUAL GENERAL MEETING

APPENDIX 1

Page

Newmark Security PLC
1

DIRECTORS, SECRETARY AND ADVISERS

Country of incorporation of
parent company:

Great Britain

Legal form:

Directors:

Public Limited Company

M. Dwek
B. Beecraft
A. Reid
M. Rapoport

Secretary and registered of¢ce:

B. Beecraft, 57 Grosvenor Street, London W1K 3JA

Company number:

333998

Auditors:

BDO Stoy Hayward LLP, 8 Baker Street, London W1U 3LL

Nominated Adviser:

Seymour Pierce Limited, 20 Old Bailey, London EC4M 7EN

Brokers:

Registrars:

Solicitors:

Ellis Stockbrokers Limited, Talisman House, Jubilee Walk, Three Bridges,
Crawley, West Sussex RH10 1LQ

Capita Registrars, Northern House, Woodsome Park, Feney Bridge,
Huddersﬁeld, West Yorkshire HD8 0LA

Field Fisher Waterhouse, 35 Vine Street, London EC3N 2AA

Newmark Security PLC
2

CHAIRMAN’S STATEMENT

Overview
The year has been a period of consolidation with all businesses continuing to be proﬁtable, the completion of
the earn out period for Grosvenor Technology and the repayment of the loan note.

Our ﬁnancial statements have been produced in accordance with International Financial Reporting Standards
(IFRS) for the ﬁrst time. Comparative information for the year ended 30 April 2006 has been restated on an
IFRS basis. Full details of IFRS accounting policies applied and reconciliation of comparative ﬁgures between
UK GAAP and IFRS are included within the ﬁnancial statements. The major ongoing impact on the operating
proﬁt of the Group is that we are now required to capitalise development costs which fulﬁl certain criteria as
set out in the accounting policies. Previously such expenditure was written off as incurred.

The earn out period for the acquisition of Grosvenor Technology expired on 31 October 2006, and, as expected,
the maximum payable of £3.5 million has been achieved over the four year period. On agreement of the
accounts for the period, unsecured loan notes denominated in Euros were issued in accordance with the
acquisition agreement. These may be settled in cash on 1 November 2007 at the earliest. Unfortunately, the
loan notes were issued at a time when the Euro was particularly strong and we have been required to make a
£111,000 exchange loss provision. Interest payable on these loan notes was ﬁxed at a quarter per cent. below
base as part of the agreement, and has been accrued in the income statement accordingly. However, in order to
comply with IFRS, we are required to discount the valuation of the loan notes using an assumed third party
market rate and this has been adjusted as a ﬁnance charge in the income statement. The three directors of
the company who remained with the Group after acquisition have agreed to remain with the Group for at
least a further three years.

The loan notes issued by the Company in 2003 were settled on 24 July 2006. When the loan notes were issued,
warrants were attached so that the loan note holders could subscribe for ordinary shares of 1p each in the
Company at a price of 1p per ordinary share. These warrants are captured under the heading of embedded
derivatives under IFRS, and therefore were fair valued at the date of transition. The warrants were then
revalued at April 2006 and the exercise date, and the changes in valuation are accounted for as other ﬁnance
gains or losses in the income statement. The loan note holders exercised these warrants so that half of the loan
notes were settled by issue of shares, the other half by cash payments.

Turnover for the year from continuing businesses was £13,422k compared to £11,839k, an increase of 13 per
cent. Gross margin for the year from continuing operations was £5,817k (43.3 per cent. of sales) compared to
£4,876k (41.2 per cent.).

Safetell turnover increased by 10 per cent. whilst Grosvenor Technology beneﬁted from the BAE Systems
contract announced in the year. The US market for Custom Micro Products recovered from the low levels of
the previous year. Within the Electronic Division, there was an improvement in margin overall, whilst there
was also an improvement within Safetell as the increase in turnover improved utilisation of staff and yielded
other efﬁciencies.

Earnings per share are shown in the income statement as 0.25p (2006: 0.11p). However, the earnings per share
before interest discount adjustments, losses of discontinued operations, provision for exchange loss and warrant
revaluation are 0.30p (2006: 0.21p) as calculated in note 10 to the accounts.

As a consequence of the increase in turnover and fall in number of employees, turnover per employee rose from
£100,390 to £117,737.

Both CMP and Safetell are the leaders in their particular markets whilst Grosvenor is a major force at the upper
price end of the access control market. There were no environmental issues having a major impact on the Group
in the year.

The Group continues to invest in research and development which will beneﬁt the results in the future.

The Disability Discrimination Act will, we believe, have an increasing impact on the needs of some of our
customers when the requirements are realised more fully, and this would beneﬁt Safetell in particular.

The Group net assets have increased in the year from £3.4 million to £5.2 million partly reﬂecting the translation
of half of the outstanding loan notes into shares.

Turnover varies month by month due to the timing and amounts of the types of contracts that we are involved
in, particularly within Safetell. The asset protection division had two very busy months before the year end
which has inﬂated the working capital position on the balance sheet at the year end.

Newmark Security PLC
3

A detailed review of their activities, results and future developments is set out in the divisional results below.

Financial results
The operating proﬁt for the year was £1,632,000 (2006: £981,000).

Turnover for the year for continuing operations was £13.4 million (2006: £11.8 million). The main commercial
factors affecting the results of the divisions are set out below.

Electronic Division
Turnover £7,441,000 (2006: £6,407,000)
Operating proﬁt £1,685,000 (2006: £1,100,000)

Turnover in Grosvenor Technology increased by some 19 per cent.
in the year to £4.3 million, and was
accompanied by a 2 per cent. increase in margin. Each year turnover includes a number of larger contracts
which vary in size and are difﬁcult to predict in terms of timing. During the year under review, we completed
the sale of our JANUS access control and security management system to BAE Systems at their major sites in
Warton, Samlesbury, Brough and others. The total sales value, including JANUS software exceeded £0.5 million.
BAE Systems has been using JANUS for some years on other sites and now has the potential to link all of the
systems together as an all encompassing ‘Enterprise Solution.’

As predicted, the eSeries door controller, due to its ease of connectivity on corporate networks around the
world, has played a large part in this success and looks set to be the deciding factor for other large contracts
still to come.

To further support these larger ‘Enterprise’ type access control systems we have developed a brand new web
connected application called Admin Manager. Admin Manager is part of the Head Ofﬁce suite of programs
and has the potential to combine multiple systems together in a world-wide network of systems. The beneﬁts
to the user are many fold and include connections to corporate HR systems, centralisation of employee records
and a secure web connection from anywhere in the world. There are separate versions of Admin Manager for
JANUS, N-TEC (Simplex distributorship) and Siteguard (Tyco distributorship) and for commercial reasons the
different Admin Manager applications are not interchangeable and do not support each other’s protocols.

Turnover in Newmark Technology increased in the year by 6 per cent. to £451k but this was offset by a
reduction in margin. We now have two distributors in Russia via the Simplex Fire distributorship and the ﬁrst
order for our Russian version of N-TEC has been received (£50K) for the prestigious Naberezhnaya Tower
Complex in Moscow, again using eSeries controllers and has been shipped already in the current year.

We have temporarily suspended UL approvals on the N-TEC product as there are new ideas that we wish to
incorporate within the certiﬁcation application and changes or additions to an already UL certiﬁed product
requires re-evaluation.

At Custom Micro Products, turnover increased by 14 per cent. overall and was aided by a recovery in sales to
the US following a drop in the previous year.

We have started manufacturing the RS21 terminal (Revised Series) ready for product launch and as announced
last year, the RS21 is fully compatible with the existing 2100 terminals and eliminates the need for our own in-
house manufacturing. The Revised Series offers snap-together components which the customer assembles at
the point of installation. This idea has been very well received and allows us to ship the product within a
couple of days from receiving an order rather than the traditional 3-4 week delay for manufacturing. There
will be a crossover period between the 2100 terminal phasing out and the RS21 terminal phasing in.

On 14 June we announced the strategic merger of Grosvenor Technology and Custom Micro Products. The two
companies will merge under the name of Grosvenor Technology and continue to operate from their respective
facilities in Bishop’s Stortford in Hertfordshire and Poole in Dorset. The remit of the newly combined business is
to provide innovative products and services targeted directly to the needs of key channels within the access
control and data-collection industries.

Combining the two businesses under a single brand enables us to better position the company to meet the
future needs of our customers. The development proposition, with the two teams working as one, is an easier
migration to newer and more powerful technologies and the opportunity for wider and greatly enhanced
product offerings. The merger also offers the best use of company synergies and consistency of application,
with more efﬁcient systems and procedures throughout. To this end it is envisaged that we will embark upon
a staff restructuring process as soon as the merger process has been completed.

Newmark Security PLC
4

It is important that we maintain the identity and the unique branding of the Custom Micro products and to this
end we have created the ‘CUSTOM’ brand-name as an umbrella for the existing catalogue of products and the
brand-new Revised Series products. This will make it easier for customers to identify and manage the CUSTOM
products from within the Grosvenor Technology product range.

Our next generation product, also announced last period, has been branded as ‘SATEON’ Intelligent Time Clocks
and Terminals. The SATEON range also takes on the new form of snap-together modules enabling off-shore
manufacturing and installer assembly on-site. To facilitate this, intelligence has been designed on-board each
module so that they are aware of each other and automatically conﬁgure themselves when connected.

SATEON terminals are speciﬁcally targeted at the ASP.NET environment and will allow us to enter the business
of recurring revenue streams where terminals and internet hosted services are offered by us on a monthly
rental to our existing customer base where they will beneﬁt from our economies of scale and our centralised
and managed back-end systems. The ﬁrst SATEON terminal, the IT3100, is at an advanced stage of development
on the hardware side and we expect to enter this business during the course of 2008.

Asset Protection Division
Turnover £5,981,000 (2006: £5,432,000)
Operating proﬁt £520,000 (2006: £490,000)

Total sales increased by 10.1 per cent. from product/contract sales growth of 6.9 per cent. and service revenue
growth of 15.5 per cent.

Eclipse rising screen programmes were maintained with various long-term customers in retail ﬁnance, petrol
retailing and some Police forces. Two previous major customers who had completed their branch programmes
some years ago have renewed purchases for a fresh round of branch refurbishments. Another customer lost to a
competitor in 2000 has been won back. The value of reconﬁguration/refurbishment works for Eclipse dropped
below the value of new installations with less work required for Abbey.

Eye2Eye sales were disappointing in the ﬁrst half of the year but accelerated dramatically in the second half, 8
of the 11 units sold in the year arose in the last two months to new customers with repeat business expected in
the new ﬁnancial year. Two more new rail customers placed orders in the last two months of the year under
review for delivery in the current year. Rail Operating Companies remain the market focus for this product with
additional demand from Police and Local Authorities.

Sales to the Post Ofﬁce of RollerCash and BiDi Safe were similar to last year with the notable addition of the
ﬁrst six Post Ofﬁce branches in WH Smith. That trial proved successful and a programme has been announced
of approximately 70 more such combinations before the end of 2008. Woolwich branches invested in the third
and ﬁnal phase of equipment for their branches before adopting a Barclays format.

A client driven development contract for payment/merchandise transfer hatches was completed at the end of
the year with the ﬁrst prototype installed in May. Although unit prices are relatively low, the volume for this
retail customer could be substantial with opportunities to sell to other retailers.

Following 18 months of preparation, the South African market has been opened with a partner who will act as
a manufacturing licensee for Eclipse rising screens and as a sub-distributor for RollerCash. The ﬁrst order was
taken in March for rising screens that was installed in June and one RollerCash is undergoing branch trials.

Service and maintenance revenue increased by 15 per cent. mainly due to the comprehensive contract for all
Abbey branches won at the beginning of 2006 and new work for Shell night pay window maintenance. This part
of the business is set to grow further.

Percentage gross margin was maintained at last year’s level on the increased turnover. Manufacturing
efﬁciencies were achieved in the last 2 months on the increased volume in Eye2Eye resulting in much better
margin for this product. Other manufacturing efﬁciencies are being introduced to improve margin on other
products.

The ﬁrst months of the new ﬁnancial year have continued at the average rate of the year under review but with
increases expected to occur from the late summer onwards. Some of this additional business has been
announced by customers but not yet conﬁrmed.

Balance sheet and cash £ow
The change to IFRS accounts has resulted in changes to both the balance sheet and cash ﬂow although, in
respect of the latter, these are mainly presentational. Goodwill has been frozen at the amortised cost ﬁgure at

Newmark Security PLC
5

the date of transition to IFRS, 1 May 2005. This ﬁgure will now remain unchanged subject only to annual
impairment reviews. Intangible assets also now include development costs which meet the criteria set out in
note 1, and will be written off over the expected life of the new product. Trade debtors and creditors are
both higher than the previous year end, due in particular to very busy trading months towards the end of the
year in the Asset Protection Division. Both operating divisions also undertake substantial contracts which
impinge upon the level of working capital at any one point in time.

The Grosvenor deferred consideration of £3.5 million will be paid from cash balances, which at the end of April
were close to £2 million, and the balance from facilities currently being agreed with the Group’s bankers.
Current liabilities last year included £1.5 million loan notes which have been settled in the year, half by the
issue of shares and the other half in cash from the proceeds of a bank loan repayable over three years.
Overall net assets increased from £3.4 million to £5.2 million.

The improvement in proﬁt for the year increased the cash ﬂow from operating activities by £0.9 million, from
£0.6 million to £1.5 million. Cash outﬂow from investing activities fell from £2.3 million to £0.3 million, primarily
due to the previous year including the payment of the deferred consideration for the acquisition of Custom
Micro Products Limited, £1.9 million. There was however a cash outﬂow from ﬁnancing activities of
£0.5 million compared to an inﬂow of £0.3 million last year. The ﬁgures for the year under review include the
partial repayment of the loan taken out to ﬁnance the repayment of the loan notes, whilst the previous year
included the proceeds from loan notes issued.

Employees
The Board would again like to express their gratitude to all employees for their contribution to the success of
the business in which they work.

Summary
The Board is pleased by the results achieved in the year and believe that this has resulted from the efforts made
in previous years to secure a solid base for the Group. Trading for the start of the current year has been
encouraging. Although the results for the ﬁrst half of the current year may be lower than the proﬁt for the
ﬁrst six months of the year under review due to the impact of the contract for BAE Systems last year, the
Board is conﬁdent further growth will be achieved in the current year.

M DWEK
Chairman

16 July 2007

Newmark Security PLC
6

REPORT OF THE DIRECTORS

The Directors submit their annual report and audited ﬁnancial statements of the Group for the year ended
30 April 2007.

Principal activities
The Group is principally engaged in the design, manufacture and supply of products and services for the
security of assets and personnel. The principal activity of the Company is that of an investment holding
company.

Financial results and dividends
The proﬁt from operations on ordinary activities before interest, tax and minority interest in the year was
£1,632,000 (2006: £981,000).

The proﬁt for the year was £1,089,000 (2006: £389,000).

Turnover for the year for continuing operations was £13.4 million (2006: £11.8 million). The directors do not
recommend the payment of a dividend. A review of the business and future prospects is given in the
Chairman’s Statement on pages 3 to 6.

Directors
The Directors who served during the year were as follows:

M Dwek
B Beecraft
M Rapoport
A Reid

Details of the Directors’ service contracts are shown in the Remuneration Committee Report on page 13.

M Dwek retires in accordance with the articles of association. M Dwek, being eligible, offers himself for
re-election at the next annual general meeting.

Share capital
Full details of changes to the share capital in the year are given in note 25 to the ﬁnancial statements on
page 42.

Financial instruments
For full details of changes to the Group’s management of its ﬁnancial instruments, please refer to note 21 to
the ﬁnancial statements on page 38.

Directors
Directors’ interests
The beneﬁcial and other interests of the Directors in the shares of the Company as at 1 May 2006 (or the date
of their appointment to the Board, if later) and 30 April 2007 were as follows:

M Dwek(a)
M Rapoport
A Reid(b)

Percentage
holding at
30 April 2007
9.5%
2.4%
16.5%

30 April 2007
42,819,467
10,555,000
73,833,237

1 May 2006
(or date of
appointment
if later)
38,069,467
10,555,000
58,833,237

(a)

(b)

These shares are held in the name of Arbury Inc., 51 per cent. of the equity share capital of which is, at the date of this report, beneﬁcially
owned by M Dwek.
These shares are in part held in the name of R.K. Harrison & Co. Limited, a company the issued equity share capital of which is, at the date of
this report, owned as to 80.3 per cent. by A Reid of which 74.8 per cent. is a beneﬁcial holding and 5.5 per cent. is a non beneﬁcial holding,
and the R.K. Harrison Retirement Beneﬁt Scheme in which A Reid has a beneﬁcial interest.

Newmark Security PLC
7

The interests of Directors in Share Option Schemes operated by the Company at 30 April 2006 and 2007 were as
follows:

Number of
Ordinary
Shares under
the Approved
Scheme
30 April 2007
—
500,000

Number of
Ordinary
Shares under
the
Unapproved
Scheme
30 April 2007
5,000,000
4,000,000

Number of
Ordinary
Shares under
the Approved
Scheme
1 May 2006
—
500,000

Number of
Ordinary
Shares under
the
Unapproved
Scheme
1 May 2006
5,000,000
4,000,000

M Dwek
B Beecraft

The Directors had no other interests in the shares or share options of the Company or its subsidiaries.

Research and development
The Group is committed to on-going research and development. The strategy is based upon market demand to
meet identiﬁed security needs in conjunction with a commercial assessment of the short to medium term
proﬁtability of each project. The amount of the costs incurred in the year are shown in note 4 to the
ﬁnancial statements.

Substantial shareholdings
Apart from the Directors’ shareholdings detailed above, the Directors have been notiﬁed of the following
additional shareholdings of 3 per cent. or more of the issued ordinary share capital of the Company as at the
date of this document:

Hillblue Investments SA
Rosa Maris Limited
Barclayshare Nominees Limited
L R Nominees Limited
Mrs G A B Reid
PH Nominees Limited

Percentage
holding
6.7%
6.7%
6.0%
4.8%
4.4%
4.3%

Number of
shares
30,000,000
30,000,000
27,022,523
21,347,439
19,750,000
19,325,000

Employee involvement
The Group keeps employees informed of matters affecting them and employees have regular opportunities to
meet and have discussions with their managers.

Share option schemes
The Company has two employee share option schemes which enable employees and Executive Directors to be
granted options to subscribe for Ordinary Shares. The Approved Scheme has been approved by the Inland
Revenue in accordance with Section 185 of, and Schedule 9 to, the Income and Corporation Taxes Act 1988
(‘‘Taxes Act’’), the Unapproved Scheme not requiring such approval. The Schemes require that exercise of
options be subject to the satisfaction of certain performance criteria.

The Remuneration Committee has administered and operated each Scheme. Further details of the share option
schemes are set out in note 28 to the Financial Statements on page 44.

Both schemes expired in April 2007 on the tenth anniversary of the formation of these schemes.

The Board now proposes to adopt the Newmark Security PLC EMI Share Option Plan (‘‘the scheme’’) which will
the HM Revenue and Custom’s Enterprise
enable the Board to grant qualifying share options under
Management Incentive (‘‘EMI’’) tax code and also unapproved share options to employees and directors.

The structure of the Scheme has been designed with the key aim of retaining employees and ensuring that their
interests are fully aligned with those of shareholders – in particular to further drive the increase in the
Company’s share price over the next 3 to 5 years. It has been designed to adhere to the basic principals ﬁrst
agreed in the design of the original schemes although allowing ﬂexibility for change taking into account market
trends as they pertain at the current time and into the future.

Newmark Security PLC
8

The Scheme will grant tax efﬁcient EMI share options where the qualifying criteria are met and unapproved
share options where those criteria are not met.

The EMI share options will vest and become exercisable 3 years from the date of grant (subject to leaver and
takeover provisions), or such other period of time speciﬁed by the Remuneration Committee. Performance
conditions to be set by the Remuneration Committee will apply to these EMI options. EMI options will have
an exercise price equal to the higher of the market value and the nominal value of a share in the Company
at the date of grant – and therefore gains made by the participants will only arise to the extent that the
Company’s share price increases above the price when the options are granted.

There is a strict legislative limit imposed on the quantum of EMI options that may be granted and held by one
individual (very broadly, not more than £100,000 worth of options per person calculated by reference to the
share price at the date of grant of such options). It is considered that an effective incentive outside this limit
should be possible, and so it is proposed that additional unapproved options may also be granted.

The unapproved share options will be subject to the same set of rules as will apply to EMI Options, including the
imposition of performance conditions.

The Scheme contains a limit on dilution such that options may not be granted if the level of dilution of the
current issued share capital by options (across all share option plans) granted over the previous 10 years
exceeds 10 per cent. The Board have considered best practice and guidelines on dilution and consider that
10 per cent. is an appropriate level for an AIM listed plc of the size of the Company.

It should be noted that options under the Scheme will only be granted to those key employees best placed to
increase the performance of the business.

Options will lapse in full if the participant leaves the company other than for a deﬁned Good Leaver provision
or death. Where cessation of employment is occasioned through death or a Good Leaver provision then the
Options (both EMI and unapproved) will vest and become exercisable in full,
irrespective of a performance
condition. In like fashion, the performance conditions will also fall away should the options vest and become
exercisable in the event of a takeover of the Company or similar corporate event.

Resolution 4 at the Annual General Meeting seeks the approval of shareholders to the new Scheme.

Environmental Policy
The Group’s environmental policy endeavours to minimise the impact of its activities on the environment
through, where possible, the proper conservation of natural resources. The Group recognises its responsibility
to review continually and improve its environmental performance and,
in doing so, seeks the input of
architects, engineers and other professional advisers.

Payment of suppliers
The Group requires its operational management to settle terms of payment with suppliers when agreeing the
terms of the transaction to ensure that suppliers are aware of these terms and to abide by them. Group trade
creditors at the year end were 27 days (2006: 41 days) of average supplies for the period, the parent company
does not trade and therefore there is no corresponding ﬁgure.

Corporate governance
The Company has complied voluntarily throughout the year as far as practicable with the provisions of the
Combined Code which only applies mandatorily to fully listed companies.

At 30 April 2007, the Board comprised a Chairman, one Executive Director and two Non-Executive Directors.

The Board meets regularly to exercise full and effective control over the Group. The Board has a number of
matters reserved for its consideration, with the principal responsibilities being to monitor performance and to
ensure that there are proper internal controls in place to agree overall strategy and acquisition policy, to
approve major capital expenditure and to review budgets. The Board will also consider reports from senior
members of the management team. The Chairman takes responsibility for the conduct of the Group and
overall strategy.

Under the Company’s Articles of Association, the appointment of all directors must be approved by the
shareholders in General Meeting, and additionally one-third of the directors are required to submit themselves
for
re-election at each Annual General Meeting. Additionally, each director has undertaken to submit
themselves for re-election at least every three years. The Board has considered the recommendation to

Newmark Security PLC
9

introduce a Nominations Committee. However,
nominations are to remain a matter reserved for the Board.

it was decided, given the small size of the Board, that

Any Director may, in furtherance of his duties, take independent professional advice where necessary, at the
expense of the Company. All directors have access to the Company Secretary whose appointment and removal
is a matter for the Board as a whole, and who is responsible to the Board as a whole and who is responsible to
the Board for ensuring that agreed procedures and applicable rules are observed.

The Company maintains an ongoing dialogue with its institutional shareholders. The Combined Code requires
proxy votes to be counted and announced after any vote on a show of hands and this has been implemented
by the Company.

The Combined Code requires Directors to review, and report to shareholders on the Group’s system of internal
control.
In September 1999 guidance to this requirement was provided to Directors by the publication of
Internal Control: Guidance for Directors on the Combined Code (‘‘The Turnbull Report’’).

The Board continues to report on internal ﬁnancial control in accordance with the guidance on internal control
and ﬁnancial reporting that was issued by the Institute of Chartered Accountants in England and Wales in 1994.
The Directors have considered the Turnbull Report but have decided that the cost of implementing the
procedures contained therein is disproportionate to expected beneﬁts at this stage of the Group’s development.

The Directors acknowledge their responsibility for the Group’s systems of internal ﬁnancial control which are
designed to provide reasonable but not absolute assurance that the assets of the Group are safeguarded and
that transactions are properly authorised and recorded.

During the year, key controls were:

day to day supervision of the business by the Executive Director,

maintaining a clear organisational structure with deﬁned lines of responsibility,

production of management information, with comparisons against budget,

maintaining the quality and integrity of personnel,

Board approval of all signiﬁcant capital expenditure, and all acquisitions.

Each Group company is responsible for the preparation of a budget for the following year, which is presented to
and required to be agreed by the Board before the beginning of that year. The subsidiary is required to report
actual performance against that plan each month.

The Board has established two standing committees, the audit and remuneration committees, comprising two
independent Non-Executive Directors. Each committee has written terms of reference.

The Audit Committee, comprising M Rapoport and A Reid,
is responsible for the appointment of external
auditors, reviewing the interim and annual ﬁnancial results, considering matters raised by the auditors and
reviewing the internal control systems operated by the Group.

The Remuneration Committee, comprising M Rapoport and A Reid meets at least once a year to review the
terms and conditions of employment of Executive Directors including the provision of
incentives and
performance related beneﬁts. The report of the Remuneration Committee is set out on page 13.

After making enquiries, the Directors believe that the Group has sufﬁcient ﬁnancial resources to continue in
operational existence for the foreseeable future. The accounts have therefore been produced on a going
concern basis.

Unauthorised brokers (Boiler Room Scams)
Over the last year many listed companies in the UK have become aware that their shareholders have received
unsolicited phone calls or correspondence concerning investment matters and unfortunately we have been
advised by some of our shareholders who have been contacted in this way. These are typically from overseas
based ‘brokers’ who target UK shareholders offering to buy their shares at excessive prices. They can be very
persistent and extremely persuasive and a 2006 survey by the Financial Services Authority (FSA) has reported
that the average amount lost by investors is around £20,000. It is not just the novice investor that has been
duped in this way; many of the victims had been successfully investing for several years. Shareholders are
advised to be very wary of any unsolicited advice, offers to buy shares at excessive or discounted prices, or
offers of free company reports.

Newmark Security PLC
10

If you receive any unsolicited investment advice:

Make sure you get the correct name of the person and organisation.

Check that they are properly authorised by the FSA before getting involved. You can check at
www.fsa.gov.uk/register

The FSA also maintains on its website a list of unauthorised overseas ﬁrms who are targeting, or have
targeted, UK investors and any approach from such organisations should be reported to the FSA so that
this list can be kept up to date and any other appropriate action can be considered. If you deal with an
unauthorised ﬁrm, you would not be eligible to receive payment under
the Financial Services
Compensation Scheme. The FSA can be contacted by completing an online form at www.fsa.gov.uk/
pages/doing/regulated/law/alerts/overseas.shtml

Inform Capita Registrars.

Details of any share dealing facilities that the Company endorses will only be included in company mailings.

More detailed information can be found on the FSA website www.fsa.gov.uk/consumer/

Identity Theft
Tips for protecting your shares:

Ensure all your certiﬁcates are kept in a safe place or hold your shares electronically in CREST via a
nominee.

Keep all correspondence from the Registrar in a safe place, or destroy correspondence by shredding.

If you change address inform the Registrar in writing or via the Shareholder Portal. If you receive a letter
from the Registrar regarding a change of address but have not recently moved please contact them
immediately.

If you are buying or selling shares only deal with brokers registered in your country of residence or the
UK.

Directors’ responsibilities
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at
any time the ﬁnancial position of the company, for safeguarding the assets of the company, for taking
reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of
a Directors’ Report which complies with the requirements of the Companies Act 1985.

The directors are responsible for preparing the annual report and the ﬁnancial statements in accordance with
the Companies Act 1985. The directors have chosen to prepare ﬁnancial statements for the Group in accordance
with International Financial Reporting Standards as adopted by the European Union (IFRSs) and have chosen to
prepare the parent company accounts in accordance with UK Generally Accepted Accounting Practice.

Group ¢nancial statements
International Accounting Standard 1 requires that ﬁnancial statements present fairly for each ﬁnancial year the
Group’s ﬁnancial position, ﬁnancial performance and cash ﬂows. This requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the deﬁnitions and recognition criteria
for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework
for the preparation and presentation of ﬁnancial statements’. In virtually all circumstances, a fair presentation
will be achieved by compliance with all applicable IFRSs. A fair presentation also requires the Directors to:

consistently select and apply appropriate accounting policies;

present
comparable and understandable information; and

including accounting policies,

information,

in a manner

that provides relevant,

reliable,

provide additional disclosures when compliance with the speciﬁc requirements in IFRS is insufﬁcient to
enable users to understand the impact of particular transactions, other events and conditions on the
entity’s ﬁnancial position and ﬁnancial performance.

Newmark Security PLC
11

Parent company ¢nancial statements
Company law requires the directors to prepare ﬁnancial statements for each ﬁnancial year which give a true
and fair view of the state of affairs of the Company and of the proﬁt or loss of the Company for that period. In
preparing these ﬁnancial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the
company will continue in business.

make judgements and estimates that are reasonable and prudent; and

state whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the ﬁnancial statements.

Financial statements are published on the Group’s website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of ﬁnancial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Group’s website is the responsibility of the directors. The
directors’ responsibility also extends to the ongoing integrity of the ﬁnancial statements contained therein.

All of the current directors have taken all the steps that they ought to have taken to make themselves aware of
any information needed by the Company’s auditors for the purposes of their audit and to establish that the
auditors are aware of that information. The directors are not aware of any relevant audit information of
which the auditors are unaware.

Auditors
A resolution to reappoint BDO Stoy Hayward LLP as auditors will be proposed at the next annual general
meeting.

By order of the Board

B BEECRAFT
Company Secretary

16 July 2007

Newmark Security PLC
12

REPORT OF THE REMUNERATION COMMITTEE

Authority
The Remuneration Committee is responsible for approving the remuneration of Executive Directors. The
remuneration of Non-Executive Directors is approved by the full Board of the Company.

Membership
The majority membership of the Remuneration Committee is required to comprise independent Non-Executive
Directors and at 30 April 2007 comprised two existing Non-Executive Directors, Alexander Reid and Michel
Rapoport.

Alexander Reid is executive chairman of R.K. Harrison & Company Limited (a shareholder of the Company) and a
director of a number of unquoted companies. He was formerly a director of the merchant bank Samuel
Montagu & Co. Limited and for 15 years was a director of various investee and group companies within
Invesco MIM.

Michel Rapoport was previously President and Chief Executive Ofﬁcer of Mosler Inc., a manufacturer and
integrator of security systems for banking, industrial and commercial organisations. Prior to that he was Vice
President of Pitney Bowes International and Chairman of Pitney Bowes France. He is President and Chief
Executive Ofﬁcer of LII Holdings, Inc., a holding company based in Atlanta, Georgia USA.

Remuneration policy
The Group’s policy is to offer remuneration packages which are appropriate to the experience, qualiﬁcations and
level of responsibility of each Executive Director and are in line with Directors of comparable public companies.

Service and consultancy agreements
The Company entered into a Consultancy Agreement with Arbury Inc. on 1 September 1997 for the services
provided to the Company by Mr Dwek. The Agreement may be terminated by either party subject to
12 months’ notice being served. Arbury Inc. is paid a fee in line with the level of responsibilities of Mr Dwek
who is also entitled to the provision of a car for which the Company will meet all running expenses except for
lease costs.

The Company entered into a Service Agreement on 5 June 1998 with Mr Beecraft which may be terminated by
either party serving six months’ notice.

Director’s emoluments
Emoluments of the directors (including pension contributions and beneﬁts in kind) of the Company were as
follows:

Executive Directors
B Beecraft
Non-Executive Directors
M Dwek(a)
A Reid(b)
M Rapoport

Consultancy/
management
agreement
»’000

Compensation
for change
of terms
»’000

—

50
—
—

—

—
—
—

—

2006

124

150

Salary
»’000

104

—
—
—

104

Fees
»’000

—

—
15
15

Total
»’000

104

50
15
15

184

403

Pension
contri-
butions
»’000

—

—
—
—

—

The directors’ share interests are detailed in the Report of the Directors on pages 7 and 8.

(a)

(b)

The Company paid a consultancy fee of £50,000 (2006: £124,127) to Arbury Inc., a company 51 per cent. owned by M Dwek which covers
salary, pension and car beneﬁts. In addition the Company issued 10 million shares in the previous year as compensation for the change of
terms from executive to non-executive chairman.
Directors’ fees in respect of A Reid of £15,000 (2006: £15,000) were paid by the Company to R. K. Harrison & Co. Limited.

Newmark Security PLC
13

REPORT OF THE INDEPENDENT AUDITORS
To the shareholders of Newmark Security PLC

We have audited the group and parent company ﬁnancial statements (the ’’ﬁnancial statements’’) of Newmark
Security PLC for the year ended 30 April 2007 which comprise the group income statement, the group and
parent company balance sheets,
the group statement of change in
shareholders’ equity and the related notes. These ﬁnancial statements have been prepared under the
accounting policies set out therein.

the group cash ﬂow statement,

Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the annual report and the group ﬁnancial statements in accordance
with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union,
and for preparing the parent company ﬁnancial statements in accordance with applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the
statement of directors’ responsibilities. Where a company is fully listed, there are additional responsibilities
contained in the Listing Rules of the Financial Services Authority. Newmark Security PLC has voluntarily
complied with the requirements of the 2003 FRC Combined Code in preparing its annual report.

Our responsibility is to audit the ﬁnancial statements in accordance with relevant legal and regulatory
requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the ﬁnancial statements give a true and fair view and have been
properly prepared in accordance with the Companies Act 1985 and whether the information given in the
directors’ report is consistent with these ﬁnancial statements. We also report to you if the company has not
kept proper accounting records, if we have not received all the information and explanations we require for
our audit, or if information speciﬁed by law regarding directors’ remuneration and other transactions is not
disclosed.

We read other information contained in the annual report and consider whether it is consistent with the
audited ﬁnancial statements. The other information comprises only the directors’ report and the chairman’s
statement. We consider the implications for our report if we become aware of any apparent misstatements or
material
inconsistencies with the ﬁnancial statements. Our responsibilities do not extend to any other
information.

Our report has been prepared pursuant to the requirements of the Companies Act 1985 and for no other
purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this
report by virtue of and for the purpose of the Companies Act 1985 or has been expressly authorised to do so by
our prior written consent. Save as above, we do not accept responsibility for this report to any other person or
for any other purpose and we hereby expressly disclaim any and all such liability.

Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts
and disclosures in the ﬁnancial statements. It also includes an assessment of the signiﬁcant estimates and
judgments made by the directors in the preparation of the ﬁnancial statements, and of whether the
accounting policies are appropriate to the group’s and company’s circumstances, consistently applied and
adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufﬁcient evidence to give reasonable assurance that the ﬁnancial
statements are free from material misstatement, whether caused by fraud or other irregularity or error. In
forming our opinion we also evaluated the overall adequacy of the presentation of information in the
ﬁnancial statements.

Newmark Security PLC
14

Opinion
In our opinion:

the group ﬁnancial statements give a true and fair view, in accordance with IFRSs as adopted by the
European Union, of the state of the group’s affairs as at 30 April 2007 and of its proﬁt for the year
then ended;

the parent company ﬁnancial statements give a true and fair view, in accordance with United Kingdom
Generally Accepted Accounting Practice, of the state of the parent company’s affairs as at 30 April 2007;

the ﬁnancial statements have been properly prepared in accordance with the Companies Act 1985; and

the information given in the Directors’ Report is consistent with the ﬁnancial statements.

BDO STOY HAYWARD LLP
Chartered Accountants and Registered Auditors

London

Date 16 July 2007

Newmark Security PLC
15

CONSOLIDATED INCOME STATEMENT
for the year ended 30 April 2007

Revenue
Cost of sales

Gross pro¢t
Provision for exchange loss
Administrative expenses

Pro¢t from operations
Finance income
Finance costs
Other ﬁnance (losses)/gains

Pro¢t before tax
Tax expense

Pro¢t for the year from continuing operations
Post-tax loss related to discontinued operations

Pro¢t for the year

Attributable to:
— Equity holders of the parent

Earnings per share
Continuing operations
— Basic and diluted (pence)

Discontinued operations
— Basic and diluted (pence)

Note
3

4
7
7
7

2007
»’000
13,422
(7,605)

5,817
(111)
(4,074)

1,632
30
(113)
(44)

1,505
(368)

1,137
(48)

1,089

2006
»’000
11,839
(6,963)

4,876
—
(3,895)

981
31
(102)
147

1,057
(149)

908
(519)

389

1,089

389

0.25p

0.11p

(0.01p)

(0.14p)

The notes on pages 20 to 45 form part of these ﬁnancial statements.

Newmark Security PLC
16

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 30 April 2007

Pro¢t for the year
Foreign exchange gains/(losses) on retranslation of overseas operations

Total recognised income and expense for the year

Attributable to:
— Equity holders of the parent

2007
»’000
1,089
1

1,090

2006
»’000
389
(39)

350

1,090

350

Newmark Security PLC
17

CONSOLIDATED BALANCE SHEET
at 30 April 2007

ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets

Total non-current assets

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Total current assets

Total assets
LIABILITIES
Current liabilities
Trade and other payables
Other short term borrowings
Corporation tax liability
Provisions

Total current liabilities

Non-current liabilities
Long term borrowings
Provisions
Other creditors

Total non-current liabilities

Total liabilities

TOTAL NET ASSETS

Capital and reserves attributable to equity

holders of the company

Share capital
Share premium reserve
Merger reserve
Foreign exchange difference reserve
Warrant reserve
Retained earnings

Minority interest

TOTAL EQUITY

Note

2007
»’000

2006
»’000

11
12
24

15
16

17
18

19
23
20

25
26
26
26
26
26

880
7,136
37

8,053

1,381
3,196
1,948

6,525

3,173
3,930
1,443
113

8,659

553
156
—

709

4,490
493
801
(38)
—
(600)

941
6,944
116

8,001

1,256
2,326
1,373

4,955

14,578

12,956

2,608
1,623
1,324
113

5,668

301
172
3,369

3,842

9,368

5,210

9,510

3,446

3,740
493
801
(39)
248
(1,861)

5,146
64

5,210

3,382
64

3,446

The ﬁnancial statements were approved by the Board of Directors and authorised for issue on 16 July 2007.

M Dwek
Director

The notes on pages 20 to 45 form part of these ﬁnancial statements.

Newmark Security PLC
18

CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 April 2007

Cash £ow from operating activities
Net proﬁt after tax from ordinary activities
Adjustments for:
Depreciation
Investment income
Interest expense
Other ﬁnance losses
Loss on sale of discontinuing operations
Income tax expense
Costs settled by share issues
Share option charge
Warrant revaluation

Operating pro¢t before changes in working

capital and provisions

(Increase)/decrease in trade and other

receivables

(Increase)/decrease in inventories
Increase/(decrease) in trade and other

payables

Cash generated from operations
Income taxes paid

Cash £ows from operating activities
Cash £ow from investing activities
Acquisition of subsidiary, net of cash

acquired

Disposal of subsidiary, net of cash disposed
Payments for property, plant & equipment
Sale of property, plant & equipment
Research & development expenditure
Interest received

Cash £ow from ¢nancing activities
Proceeds from loan notes
Proceeds from loan
Repayment loan notes
Repayment of bank loans
Repayment of ﬁnance lease creditors
Interest paid

Note

2007
»’000

1,089

348
(30)
113
158
—
347
—
38
(114)

1,949

(798)
(125)

654

—
—
(242)
47
(269)
30

—
750
(750)
(194)
(154)
(113)

2007
»’000

2006
»’000

389

302
(31)
311
251
192
57
184
21
(398)

1,278

385
316

(1,017)

(1,937)
(25)
(329)
24
(112)
31

1,680
(210)

1,470

962
(423)

539

(434)

(2,348)

225
—
—
—
(106)
(112)

Increase/(decrease) in cash and cash equivalents

(461)

575

(1,802)

The notes on pages 20 to 45 form part of these ﬁnancial statements.

Newmark Security PLC
19

NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 April 2007

Accounting policies

1.
Newmark Security PLC (the ‘‘Company’’)
is a company domiciled in England. The consolidated ﬁnancial
statements of the Company for the year ended 30 April 2007 comprise the Company and its subsidiaries
(together referred to as the ‘‘Group’’)

Basis of preparation
The principal accounting policies adopted in the preparation of the ﬁnancial statements are set out below. The
policies have been consistently applied to all the years presented, unless otherwise stated.

These consolidated ﬁnancial statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs) and its interpretations (IFRICs) issued by the International Accounting Standards
Board (IASB) and with those parts of the Companies Act 1985 applicable to companies preparing their
accounts under IFRS. This is the ﬁrst time the Group has prepared its ﬁnancial statements in accordance with
IFRSs, having previously prepared its ﬁnancial statements in accordance with UK accounting standards. Details
of how the transition from UK accounting standards to IFRSs has affected the Group’s reported ﬁnancial
position, ﬁnancial performance and cash ﬂows are given in note 2.

The preparation of ﬁnancial statements in conformity with IFRSs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of income and
expenses, and assets and liabilities. These judgements and assumptions are based on historical experience and
various other factors that are believed to be reasonable under the circumstances, the result of which form the
basis of making the judgements about carrying values of assets and liabilities. Actual results may differ from
these estimates.

These estimates and underlying assumptions are reviewed on an ongoing basis. Any revisions to the accounting
estimates are recognised in the period on which the revision is made.

The Company has elected to prepare its parent company ﬁnancial statements in accordance with UK GAAP.
These are presented on pages 46 to 50.

First-time adoption
In preparing these ﬁnancial statements, the Group has elected to apply the following transitional arrangements
permitted by IFRS 1 ’First-time Adoption of International Financial Reporting Standards’:

Business combinations effected before 1 May 2005, including those that were accounted for using the
merger method of accounting under UK accounting standards have not been restated.

The carrying amount of capitalised goodwill at 30 April 2005 that arose on business combinations
accounted for using the acquisition method under UK GAAP was frozen at this amount and tested for
impairment at 1 May 2005

Goodwill written-off directly to reserves on business combinations effected before 1 January 1998 has not
retrospectively been capitalised and will not be transferred to the income statement on the disposal of a
subsidiary to which it relates.

Only those exchange differences arising on the retranslation of foreign operations since 1 May 2005 have
been recognised as a separate component of equity.

IFRS 2 ’Share-based payments’ has been applied to employee options granted after 7 November 2002 that
had not vested at the date of transition, 1 May 2005.

Except as noted above, the following principal accounting policies have been applied consistently in the
preparation of these ﬁnancial statements:

Standards, Amendments and Interpretations Effective But Not Relevant
The following standards, amendments and interpretations to the published standards are mandatory for
accounting periods beginning on or after 1 May 2006 but they are not relevant to the Group for the year
ended 30 April 2007.

—

IAS 19 (Amendment) — Employee Beneﬁts

IAS 28 — Investments in Associates

Newmark Security PLC
20

—

IAS 39 (Amendment) — Cash Flow Hedge Accounting of Forecast Intragroup Transactions

IAS 39 (Amendment) — The Fair Value Option

IAS 39 and IRFS (Amendment) — Financial Guarantee Contracts

IFRS 6 — Exploration for and Evaluation of Mineral Resources

IFRIC 4 — Determining whether an arrangement contains a lease

IFRIC 5 — Rights to Interest Arising from Decommissioning, Restoration and Environmental funds

IFRIC 6 — Liabilities Arising from Participating in a Speciﬁc Market — Waste Electrical and Electronic
Equipment

IFRIC 7 — Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinﬂationary
Economies.

Standards and Interpretations to Existing Standards that are not yet effective and have not been adopted early by
the Group
The following standards and interpretations to published standards have been published that are mandatory for
the Group’s accounting periods beginning on or after 1 May 2007 or later periods but which the Group has not
adopted early. It is noted that IFRS 8 and IAS 23 (revised) have not yet been endorsed the by the EU.

—

IFRS 7 — Financial Instruments: Disclosure and the complementary amendment to IAS 1, Presentation of
ﬁnancial statements — capital disclosures (applicable for annual periods beginning on or after 1 January
2007). IFRS 7 introduces new disclosures of qualitative and quantitative information about exposure to
risks. This is not expected to have an impact on the classiﬁcation or valuation of the Group’s ﬁnancial
instruments.

IFRS 8 — Operating Segments (effective for annual periods beginning on or after 1 January 2009). IFRS 8
requires revision to the identiﬁcation of segments, the explanations of the basis on which the segment
information is prepared, and provide reconciliations to the amounts recognised in the income statement
and balance sheet. This is not expected to affect reported net assets or net proﬁt.

IFRIC 10 — Interim Financial Reporting and Impairment (effective for annual periods beginning on or after
1 November 2006). IFRIC 10 prohibits impairment losses recognised in an interim period on goodwill,
investments in equity instruments and investments in ﬁnancial assets carried at cost to be reversed at a
subsequent balance sheet date. This is not expected to have any impact on the accounts.

IFRIC 9 — Reassessment of Embedded Derivatives (effective for annual periods beginning on or after
1 June 2006). IFRIC 9 requires an entity to assess whether an embedded derivative is required to be
separated from the host contract and accounted for as a derivative when the entity ﬁrst becomes a
party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of
the contract that signiﬁcantly modiﬁes the cash ﬂows that otherwise would be required under the
contact, in which case reassessment is required. The Group does not expect IFRIC 9 to have a material
impact.

IFRIC 11 — IFRS 2: Group and Treasury Share Transactions (effective for annual periods beginning on or
IFRIC 11 contains guidance on how an entity should account for share-based
after 1 March 2007).
payment involving an entity’s own equity instruments in which the entity chooses or is required to buy
its own equity instruments to settle the shares-based payment obligation. It also contains guidance on
the treatment when a parent grants rights to it equity instruments to employees of its subsidiary or a
subsidiary grants rights to equity instruments of its parent to its employee in the individual entities’
ﬁnancial statements. IFRIC 11 is not expected to have an impact on the Group because it does not
intend nor is it required to purchase its own equity instrument to settle the share-based payment
obligation, and the individual entities do not produce accounts under IFRSs.

IFRIC 12 — Service Concession Arrangements (effective for annual periods beginning on or after 1 January
2008).
IFRIC 12 clariﬁes how certain aspects of existing IASB literature are to be applied to service
concession arrangements. IFRIC 12 is not relevant to the Group’s operations.

IAS 23 (revised) — Borrowing costs (effective for borrowing costs relating to qualifying assets for which
the commencement date for capitalisation is on or after 1 January 2009). IAS 23 (revised) requires the
capitalisation of
interest on qualifying assets, while these qualifying assets include development
intangibles, it is not anticipated that the standard will have a material impact on proﬁt or net assets.

Newmark Security PLC
21

Revenue
Turnover is stated net of value added tax. Sales of equipment are recognised when the equipment is shipped to
the customer or installed. Other sales are either recognised on completion of work, or spread evenly over the
term of the contract.

Basis of consolidation
Where the company has the power, either directly or indirectly, to govern the ﬁnancial and operating policies of
it is classiﬁed as a subsidiary. The
another entity or business so as to obtain beneﬁts from its activities,
consolidated ﬁnancial statements present
formed a single entity.
Intercompany transactions and balances between group companies are therefore eliminated in full.

the Group as if

the results of

Business combinations
The consolidated ﬁnancial statements incorporate the results of business combinations using the purchase
method other than disclosed above (see ’ﬁrst-time adoption’). In the consolidated balance sheet, the acquiree’s
liabilities and contingent liabilities are initially recognised at their fair values at the
identiﬁable assets,
acquisition date. The results of subsidiaries acquired or disposed of during the year are included in the
consolidated income statement from the effective date of acquisition or up to the effective date of disposal
as appropriate.

Goodwill
Goodwill represents the excess of the cost of a business combination over the interest in the fair value of
identiﬁable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given,
liabilities assumed and equity instruments issued, plus any direct costs of acquisition.

Goodwill
income statement.

is capitalised as an intangible asset with any impairment in carrying value being charged to the

Where the fair value of identiﬁable assets,
consideration paid, the excess is credited in full to the income statement.

liabilities and contingent liabilities exceed the fair value of

Impairment of non-ﬁnancial assets
Impairment tests on goodwill and other intangible assets with indeﬁnite useful economic lives are undertaken
annually on 30 April. Where the carrying value of an asset exceeds its recoverable amount (ie the higher of
value in use and fair value less costs to sell), the asset is written down accordingly. In assessing value in use,
the estimated future cash ﬂows are discounted to their present value using a pre-tax discount rate that reﬂects
the current market assessment of the time value of money and risk speciﬁc to the asset.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is
carried out on the asset’s cash-generating unit (ie the lowest group of assets in which the asset belongs for
which there are separately identiﬁable cash ﬂows). Goodwill is allocated on initial recognition to each of the
Group’s cash-generating units that are expected to beneﬁt from the synergies of the combination giving rise
to the goodwill.

Impairment charges are included in the administrative expenses line item in the income statement. An
impairment loss in respect of goodwill
In respect of other assets, an impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation,
if no impairment had been
recognised.

is not reversed.

In testing for impairment, management has to make judgements and estimates about future events which are
uncertain. Adverse results compared to these judgements could alter the decision of whether an impairment is
required.

Foreign currency
Items included in the ﬁnancial statements of each of the Group entities are measured using the currency of the
primary economic environment in which the entity operates (the ‘‘functional currency’’). The consolidated
ﬁnancial statements are presented in sterling, which is the Company’s functional and presentation currency.

Transactions entered into by Group entities in a currency other than the functional currency of the primary
economic environment in which it operates are recorded at the rates ruling when the transactions occur.
Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date.

Newmark Security PLC
22

Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are similarly
recognised immediately in the income statement, except for foreign currency borrowings qualifying as a
hedge of a net investment in a foreign operation.

The results and ﬁnancial position of all Group companies that have a functional currency different from the
presentation currency are translated into the presentation currency as follows:

(i)

(ii)

assets and liabilities are translated at the closing rate at the date of the balance sheet;

income and expenses are translated at average exchange rates; and

(iii)

all resulting exchange differences are recognised as a separate component of equity.

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those
ruling when the transactions took place. All assets and liabilities of overseas operations,
including goodwill
arising on the acquisition of those operations, are translated at the rate ruling at the balance sheet date.
Exchange differences arising on translating the opening net assets at opening rate and the results of overseas
operations at average rate are recognised directly in equity (the ‘‘foreign exchange reserve’’). Exchange
differences recognised in the income statement of Group entities’ separate ﬁnancial statements on the
translation of long-term monetary items forming part of the group’s net investment in the overseas operation
concerned are reclassiﬁed to the foreign exchange reserve if the item is denominated in the functional currency
of the Group or the overseas operation concerned.

At the date of the transition to IFRS the cumulative translation differences for foreign operations have been
deemed to be zero.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange
reserve relating to that operation up to the date of disposal are transferred to the income statement as part
of the proﬁt or loss on disposal.

Financial assets
Loans and receivables: These assets are non-derivative ﬁnancial assets with ﬁxed or determinable payments that
are not quoted in an active market. They arise principally through the provision of goods and services to
customers (trade receivables), but also incorporate other types of contractual monetary asset. They are carried
at amortised cost.

Other ﬁnancial liabilities: Other ﬁnancial liabilities include the following items:

Trade payables and other short-term monetary liabilities, which are recognised at amortised cost.

Bank borrowings are initially recognised at fair value. Such interest bearing liabilities are subsequently
measured at amortised cost using the effective interest rate method, which ensures that any interest
expense over the period to repayment is at a constant rate on the balance of the liability carried in the
balance sheet. ‘‘Interest expense’’ in this context includes initial transaction costs, as well as any interest
or coupon payable while the liability is outstanding.

Share-based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to
the income statement over the vesting period. Equity settled share options are recognised with a corresponding
credit to equity.

Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected
to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of options that eventually vest. Market vesting conditions are factored into the
fair value of the options granted. As long as all other vesting conditions are satisﬁed, a charge is made
irrespective of whether the market vesting conditions are satisﬁed. The cumulative expense is not adjusted for
failure to achieve a market vesting condition.

Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred
to the Group (a ‘‘ﬁnance lease’’), the asset is treated as if it had been purchased outright. The amount initially
recognised as an asset is the fair value, or if lower, the present value of the minimum lease payments payable
over the term of the lease. The corresponding lease commitment is shown as a liability. Lease payments are
analysed between capital and interest. The interest element is charged to the income statement over the

Newmark Security PLC
23

period of the lease and is calculated so that it represents a constant proportion of the lease liability. The capital
element reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an
‘‘operating lease’’), the total rentals payable under the lease are charged to the income statement on a
straight-line basis over the lease term.

The land and buildings elements of property leases are considered separately for the purposes of lease
classiﬁcation.

Internally generated intangible assets (research and development costs)
Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Expenditure on internally developed products is capitalised if it can be demonstrated that:

it is technically feasible to develop the product for it to be sold;

adequate resources are available to complete the development;

there is an intention to complete and sell the product;

the group is able to sell the product;

sale of the product will generate future economic beneﬁts; and

expenditure on the project can be measured reliably.

Capitalised development costs are amortised over the periods the Group expects to beneﬁt from selling the
products developed. The amortisation expense is included within the cost of sales line in the income statement.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal
projects are recognised in the income statement as incurred.

Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.

Current Tax
The tax currently payable is based on taxable proﬁt for the year. Taxable proﬁt differs from proﬁt as reported in
the income statement because it excludes items of income or expense that are taxable or deductable in other
years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the
balance sheet differs to its tax base, except for differences arising on:

the initial recognition of goodwill;

goodwill for which amortisation is not tax deductible;

the initial recognition of an asset or liability in a transaction which is not a business combination and at
the time of the transaction affects neither accounting or taxable proﬁt; and

investments in subsidiaries and jointly controlled entities where the group is able to control the timing of
the reversal of the difference and it is probable that the difference will not reverse in the foreseeable
future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable proﬁt will be
available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantially
enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are
settled/(recovered). Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the group has a legally enforceable right to offset current tax
assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on
either:

the same taxable group company; or

Newmark Security PLC
24

different group entities which intend either to settle current tax assets and liabilities on a net basis, or to
realise the assets and settle the liabilities simultaneously,
in each future period in which signiﬁcant
amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Property, plant and equipment
Items of property, plant and equipment are recognised at cost. As well as the purchase price, cost includes
directly attributable costs and the estimated present value of any future costs of dismantling and removing
items. The corresponding liability is recognised within provisions.

Freehold land is not depreciated. Depreciation is provided on all other items of property, plant and equipment to
write off the carrying value of items over their expected useful economic lives. It is applied at the following
rates:

Freehold buildings
Short leasehold improvements
Plant and machinery
Fixtures and ﬁttings
Computer equipment
Motor vehicles

—
—
—
—
—
—

5 per cent. per annum straight line
evenly over the length of the lease
20 per cent. per annum straight line
10 per cent. per annum straight line
25 per cent. per annum straight line
25 per cent. per annum reducing balance

Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost
comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their
present location and condition.

Weighted average cost is used to determine the cost of ordinarily interchangeable items.

Net realisable value is the estimated selling price in the ordinary course of business,
necessary to make the sale.

less estimated costs

Provisions
Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a result of past
transactions, it is probable that the Group will be required to settle the obligation, and a reliable estimate can
be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation.

Where a provision is measured using the estimated cashﬂow required to settle the obligation then its carrying
value is the present value of those cashﬂows.

Onerous contracts — Present obligations arising under onerous contacts are recognised and measured as a
provision. An onerous contract is considered to exist where the Group has a contract under which the
unavoidable costs of meeting the obligations under the contract exceed the economic beneﬁts expected to be
received under it.

Dilapidations — Dilapidation provisions are provided on leasehold properties where the terms of the lease
require the Group to make good any changes made to the property during the period of the lease. Where a
dilapidation provision is required the Group recognises an asset and provision equal to the discounted cost of
restating the property to its original state. The asset is depreciated over the remaining term of the lease.

Warranty — Provisions for warranty costs are recognised at the date of sale of the relevant products at the
directors’ best estimate of the expenditure required to settle the Group’s obligation.

Cash and cash equivalents
Cash and cash equivalents in the cash ﬂow statement include cash in hand, deposits held at call with banks,
other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.
Bank overdrafts are included in borrowings in current liabilities in the balance sheet.

Derivative ﬁnancial instruments
if later, on the date a
Derivatives are initially recognised at fair value at the date of transition to IAS or,
derivative is entered into. Derivatives are subsequently re-measured at their fair value at each balance sheet
date. The resulting gain or loss is recognised immediately in the income statement. The fair value of
derivatives has been determined by using market data and the use of established estimation techniques such

Newmark Security PLC
25

as discounted cash ﬂow and option valuation models. Derivatives embedded in other ﬁnancial instruments or
other host contracts are treated as separate derivatives when their risks and characteristics are not closely
related to those of the host contracts and the host contracts are not measured at fair value with changes in
fair value recognised in proﬁt or loss.

Borrowing costs
Borrowing costs are recognised as an expense in the period in which they are incurred.

Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
deﬁnition, seldom equal the related actual results. These estimates and judgements are continually evaluated
and are based on historical experience and other factors,
including expectations of future events that are
believed to be reasonable under the circumstances. The estimates and assumptions that have a signiﬁcant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial year
are discussed below.

(a)

(b)

Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment,
in accordance with the
accounting policy stated in note 1. The recoverable amounts of cash-generating units have been
determined based on value-in-use calculations. These calculations require the use of estimates.

Development costs on internally developed products are capitalised if it can be demonstrated that the
expenditure meets the criteria set out in note 1. These judgements are made using the historical,
commercial and technical experience of senior members of the management team.

First time adoption of International Financial Reporting Standards (IFRS)

2.
Reconciliations and explanatory notes on how the transition to IFRS has affected proﬁt and net assets
previously reported under UK Generally Accepted Accounting Principles are given below:

Proﬁt and loss account reconciliation for the year ended 30 April 2006

Sub-note
(ii)
(ii)/(iii)

UK GAAP
»’000
12,159
(7,317)

Adjustments
»’000
(320)
354

IFRS
»’000
11,839
(6,963)

4,876
(3,895)
—

981
(102)
31
147

1,057
(149)
(519)

389
—

389

4,842
(4,480)
(192)

170
(311)
31
(251)

(361)
(58)
—

(419)
—

(419)

34
585
192

811
209
—
398

1,418
(91)
(519)

808
—

808

Turnover
Cost of sales

Gross proﬁt
Administrative expenses
Loss on disposal/closure of subsidiary

Proﬁt from operations
Finance costs
Finance income
Other ﬁnance losses

(i), (ii) and (iv)
(ii)

(ii)

(v)

(Loss)/proﬁt before tax
Corporation tax expense
Post-tax loss related to discontinued operations

(ii), (iii), (iv), (vi), (vii) and (viii)
(ii)

(Loss)/proﬁt after tax
Dividends

Retained (loss)/proﬁt for the year

Newmark Security PLC
26

IFRS
»’000

803
6,820
115

7,738

1,664
2,898
3,205

7,767

15,505

30
5,037
83
826
491
93

6,560

1,582
3,156
750
169

5,657

—
—
45

—
—
—

—

—
—
—
—
—
77

—
—
—
—

—

(32)

12,217

3,288

Balance sheet reconciliation as at 1 May 2005

Sub-note

UK GAAP
»’000

Adjustments
»’000

Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax asset

Total non-current assets

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Total current assets

Total assets

Current liabilities
Bank overdraft
Trade and other payables
Other ﬁnancial liabilities
Corporation tax liability
Other taxation and social security
Provisions

Total current liabilities

Non-current liabilities
Financial liabilities
Other creditors
Corporation tax
Provisions

Total non-current liabilities

Total liabilities

TOTAL NET ASSETS AND EQUITY

(vi)

(vii)

803
6,820
70

7,693

1,664
2,898
3,205

7,767

15,460

30
5,037
83
826
491
16

6,483

1,582
3,156
750
169

5,657

12,140

3,320

Newmark Security PLC
27

Balance sheet reconciliation as at 30 April 2006

Sub-note

UK GAAP
»’000

Adjustments
»’000

Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax asset

Total non-current assets

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Total current assets

Total assets

Current liabilities
Bank overdraft
Trade and other payables
Other ﬁnancial liabilities
Corporation tax liability
Employee beneﬁts
Current tax liabilities
Provisions

Total current liabilities

Non-current liabilities
Financial liabilities
Other creditors
Employee beneﬁts
Provisions

Total non-current liabilities

Total liabilities

TOTAL NET ASSETS AND EQUITY

(i)/(iii)
(vi)

(iv)

(vii)

941
6,439
70

7,450

1,256
2,401
1,373

5,030

12,480

—
2,268
1,623
1,324
—
340
28

5,583

301
3,369
—
180

3,850

9,433

3,047

—
505
46

551

—
(75)
—

(75)

476

—
—
—
—
—
—
77

—
—
—
—

—

399

IFRS
»’000

941
6,944
116

8,001

1,256
2,326
1,373

4,955

12,956

—
2,268
1,623
1,324
—
340
105

5,660

301
3,369
—
180

3,850

9,510

3,446

Newmark Security PLC
28

Adjustments
Explanations of the adjustments made to the UK GAAP income statement and balance sheets are as follows:

Sub-note Explanation
(i)
(ii)

Reversal of the goodwill amortisation charge of £393,000 in the 2006 UK GAAP accounts
Transfer of results of discontinued operations to separate line comprising

Turnover
Cost of sales

Gross proﬁt
Administrative expenses
Loss on disposal/closure of subsidiary

Loss from operations
Finance costs
Tax

Post-tax loss related to discontinued operations

»’000
320
(242)
______
78
(288)
(192)

(402)
(209)
92

(519)

(iii)
(iv)

(v)
(vi)
(vii)
(viii)

Capitalisation of development costs in cost of sales to intangible assets £112,000
Write off compensation paid to Chairman for change of role from executive to non-executive role
£75,000
Adjustment to valuation of warrants attached to loan notes issued by Company, £398,000
Deferred tax recalculated in accordance with IFRS and other IFRS accounting policy changes
Holiday pay provision
Employee share options granted after 7 November 2002

Cash ﬂow statement for the year ended 30 April 2006
The only changes to the cash ﬂow statement are presentational. The key ones include:

Presenting a statement showing movements in cash and cash equivalents, rather than just cash. Cash
under UK GAAP comprised only amounts accessible in 24 hours without penalty less overdrafts
repayable on demand. The components of cash equivalents are shown in note 30.

Classifying tax cash ﬂows as relating to operating activities.

3.
Revenue
Revenue arises from:

Sale of goods
Provision of services

Pro¢t from operations

4.
This has been arrived at after charging/(crediting):

Staff costs (note 5)
Depreciation of property, plant and equipment
— owned assets
— leased assets
Foreign exchange differences
Research and development costs
Operating lease expense
— Plant and machinery
— Property
Write-down of inventory to net realisable value
Audit fees
Fees paid to the Group’s auditors for tax services
provided to the company and UK subsidiaries
(Proﬁt) on disposal of ﬁxed assets

Newmark Security PLC
29

2007
»’000
10,320
3,102

13,422

2007
»’000
4,898

241
107
35
618

18
196
—
61

19
(6)

2006
»’000
8,934
2,905

11,839

2006
»’000
4,711

195
107
19
459

53
235
—
47

13
—

Staff costs

5.
Staff costs (including Executive Directors) comprise:

Wages and salaries
Short-term non-monetary beneﬁts
Deﬁned contribution pension cost
Share-based payment expense
Employer’s national insurance contributions and similar taxes

2007
»’000
4,142
108
153
38
457

4,898

The average numbers employed (including Executive Director) within the following categories were:

Management, sales and administration
Production

2007
No.
73
41

114

Key management remuneration (comprising Executive Director and Directors of subsidiary companies);

Salaries and beneﬁts

2007
»’000
834

2006
»’000
3,966
137
148
21
439

4,711

2006
No.
75
44

119

2006
»’000
764

Newmark Security PLC
30

Segment information

6.
The Group’s primary reporting format for reporting segment information is business segments which reﬂect the
management and reporting structure in the Group. Electronic division includes Grosvenor Technology, Newmark
Technology and Custom Micro Products, whilst the asset protection division includes Safetell Limited and its
afﬁliated companies.

Revenue
External
Intercompany

Total

Proﬁt before tax
Continuing operations
Discontinued operations

Total

Balance sheet
Assets
Liabilities

Net assets

Other
Capital expenditure
— Tangible ﬁxed assets (net)
— Intangible ﬁxed assets
Depreciation, amortisation and other non-

cash expenses

Revenue
External
Intercompany

Total

Proﬁt before tax
Continuing operations
Discontinued operations

Total

Balance sheet
Assets
Liabilities

Net assets

Other
Capital expenditure (net)
— tangible
— intangible
Depreciation, amortisation and other non-

cash expenses

Business segments

Asset
protection
division
2007
»’000

Discontinued
businesses
2007
»’000

Head of¢ce
2007
»’000

5,981
—

5,981

512
—

512

—
—

—

—
(69)

(69)

Electronic
division
2007
»’000

7,441
—

7,441

1,706
—

1,706

10,181
(1,476)

8,705

4,056
(1,908)

2,148

284
(1,634)

(1,350)

181
269

147

2006
»’000

6,407
—

6,407

1,114
—

1,114

101
—

187

2006
»’000

5,432
—

5,432

516
—

516

—
—

2006
»’000

320
—

320

—
(611)

(611)

—
—

—

(713)
—

(713)

73
(4,366)

(4,293)

7
—

2006
»’000

—
—

—

(573)
—

(573)

Total
2007
»’000

13,422
—

13,422

1,505
(69)

1,436

14,594
(9,384)

5,210

289
269

348

2006
»’000

12,159
—

12,159

1,057
(611)

446

12,956
(9,510)

3,446

444
112

486

9,176
(1,093)

8,083

3,335
(1,450)

1,885

320
(1,878)

(1,558)

125
(5,089)

(4,964)

194
112

125

250
—

155

—
—

189

Newmark Security PLC
31

The Group’s secondary reporting format for reporting segment information is geographic segments.

UK
Europe
USA
Other

Continuing operation
UK
Europe
USA
Other

Discontinued operations
UK
Europe

External revenue by
location of customers
2006
»’000
10,663
943
431
122

2007
»’000
11,546
925
800
151

13,422

12,159

Revenue

2007
»’000

11,546
925
800
151

13,422

—
—

—

2006
»’000

10,343
943
431
122

11,839

320
—

320

Total assets by
location of assets

Net tangible capital
expenditure by
location of assets

2007
»’000
14,294
284
—
—

14,578

2006
»’000
12,643
313
—
—

12,956

2007
»’000
289
—
—
—

289

2006
»’000
444
—
—
—

444

Segment assets
2007
»’000

2006
»’000

Capital expenditure

2007
»’000

2006
»’000

14,294
—
—
—

14,294

—
284

284

12,323
—
—
—

12,323

320
313

633

289
—
—
—

289

—
—

—

444
—
—

444

—
—

—

13,422

12,159

14,578

12,956

289

444

Finance income and expense

Finance income
Bank interest received

Finance expense
Bank borrowings
Company loan notes
Interest on loan notes for deferred consideration
Finance leases

Other ﬁnance gains/(losses)
Discount charge on deferred consideration
Gain on warrant valuation
Interest rate adjustment on deferred consideration

2007
»’000

(30)
(27)
(38)
(18)

(131)
114
(27)

2007
»’000

(113)

(44)

(127)

2006
»’000

(5)
(88)
—
(9)

(251)
398
—

2006
»’000

(102)

147

Newmark Security PLC
32

Tax expense

Current tax expense
Continuing businesses
UK corporation tax and income tax of overseas operations

on proﬁts for the year

Adjustment for (over)/under provision in prior periods

Discontinued businesses
UK corporation tax and income tax of overseas operations

on proﬁts for the year

Adjustment for over provision in prior periods

Deferred tax expense
Origination and reversal of temporary differences

Total tax charge

2007
»’000

2006
»’000

329
(40)

5
(26)

98
52

289

150

29
(121)

(1)

(21)

347

(92)

(1)

The reasons for the difference between the actual tax charge for the year and the standard rate of corporation
tax in the UK applied to proﬁts for the year are as follows:

Proﬁt before tax

Expected tax charge based on the standard rate of corporation tax in the UK of

30 per cent. (2006 — 30 per cent.)

Interest discount charge on deferred consideration
Effects on proﬁts of other items not deductible for tax purposes
Grossing up foreign income
Double tax relief
Utilisation of previously unrecognised tax losses
Adjustment to tax charge in respect of previous periods
Losses not utilised

Total tax charge

2007
»’000
1,505

2006
»’000
446

451
47
(48)
—
—
(37)
(66)
—

347

134
78
(73)
2
(8)
(39)
(69)
32

The Group has the following tax losses, subject to agreement by HM Inspector of Taxes, available for affect
against future trading proﬁts and capital gains as appropriate:

Management expenses
Trading losses
Capital losses

If the losses were to be recognised this would give rise to deferred tax assets as follows:

Management expenses
Trading losses
Capital losses

2007
»’000
523
2,139
792

2007
»’000
157
642
238

2006
»’000
523
2,323
792

2006
»’000
157
697
238

Newmark Security PLC
33

Discontinued operations

Turnover
Cost of sales

Gross proﬁt
Administrative expense
Loss on disposal/closure of subsidiary

Loss from operations
Finance costs

Loss before tax
Tax

Post-tax loss related to discontinued operations

2007
»’000
—
—

—
—
—

—
(69)

(69)
21

(48)

The cash ﬂow statement includes the following amounts relating to discontinued operations:

Operating activities
Investing activities
Financing activities

10. Earnings per share

Numerator
Earnings used in basic and diluted EPS-continuing operations

(Losses) used in basic and diluted EPS-discontinued operations

2007
»’000
—
—
(69)

(69)

2007
»’000

1,137

(48)

No.

2006
»’000
320
(242)

78
(288)
(192)

(402)
(209)

(611)
92

(519)

2006
»’000
(551)
(36)
—

(587)

2006
»’000

908

(519)

No.

Denominator
Weighted average number of shares used in basic and diluted EPS
–continuing and discontinued operations

429,437,268 367,856,416

Employee share options have been excluded from the calculation of diluted EPS as their exercise price is greater
than the weighted average share price during the year (i.e. they are out-of-the-money) and therefore would not
be advantageous for the holders to exercise those options. Further information concerning share options is set
out in note 28.

The basic earnings per share before interest discount, losses of discontinued operations, provision for exchange
losses and warrant revaluation has also been presented since,
in the opinion of the directors, this provides
shareholders with a more appropriate measure of earnings derived from the Group’s businesses. It can be
reconciled to basic earnings per share as follows:

Basic earnings per share (pence)
Discount charge on deferred consideration
Losses of discontinued operations
Provision for foreign exchange loss
Warrant revaluation

Earnings per share before interest discount, losses of discontinued operations,

provision for foreign exchange loss and warrant revaluation

Newmark Security PLC
34

2007
pence
0.25
0.04
0.01
0.03
(0.03)

2006
pence
0.11
0.07
0.14
—
(0.11)

0.30

0.21

Reconciliation of earnings
Proﬁt used for calculation of basic earnings per share
Discount charge on deferred consideration
Losses of discontinued operations
Provision for foreign exchange loss
Warrant revaluation

2007
»’000

1,089
158
48
111
(114)

2006
»’000

389
251
519
—
(398)

Earnings before interest discount, losses of discontinued operations, provision for

foreign exchange loss and warrant revaluation

1,292

761

11. Property, plant and equipment

At 30 April 2006
Cost
Accumulated depreciation

Net book value

At 30 April 2007
Cost
Accumulated depreciation

Net book value

Year ended 30 April 2006
Opening net book value
Additions
Disposed through business combinations
Disposals
Depreciation
Exchange differences
Reclassiﬁcations

Closing net book value

Year ended 30 April 2007
Opening net book value
Additions
Disposals
Depreciation
Exchange differences

Closing net book value

Freehold
land and
buildings
»’000

Short
leasehold
improvements
»’000

Plant,
machinery
and motor
vehicles
»’000

Computers,
¢xtures and
¢ttings
»’000

322
(113)

209

320
(125)

195

220
—
—
—
(15)
4
—

209

209
—
—
(12)
(2)

195

260
(141)

119

260
(165)

38
103
—
—
(22)
—
—

119

119
—
—
(24)
—

1,227
(712)

515

1,332
(853)

479

462
321
—
(22)
(215)
—
(31)

515

515
274
(43)
(267)
—

479

336
(238)

364
(253)

111

83
45
(8)
(3)
(50)
—
31

98
58
—
(45)
—

111

Total
»’000

2,145
(1,204)

941

2,276
(1,396)

880

803
469
(8)
(25)
(302)
4
—

941

941
332
(43)
(348)
(2)

880

The net book value of tangible ﬁxed assets for the Group includes an amount of £131,244 (2006: £249,901) in
respect of assets held under ﬁnance leases and hire purchase contracts. The related depreciation charge on
these assets for the year was £106,826 (2006: £107,204).

Newmark Security PLC
35

12.

Intangible assets

At 30 April 2006
Cost
Accumulated impairment losses

Net book value

At 30 April 2007
Cost
Accumulated impairment losses

Net book value

Year ended 30 April 2006
Opening net book value
Additions
– Internally developed
– Through business combinations

Closing net book value

Year ended 30 April 2007
Opening net book value
Additions
– Internally developed
Discount adjustment on contingent consideration

Closing net book value

Development
costs
(internally
generated)
»’000

Goodwill
»’000

6,832
—

6,832

6,755
—

6,755

6,820

—
12

6,832

—
(77)

6,755

112
—

112

381
—

381

—

112
—

112

269
—

381

Total
»’000

6,944
—

6,944

7,136
—

7,136

6,820

112
12

6,944

269
(77)

7,136

The group has no contractual commitments for development costs (2006 — £Nil).

All development costs have a ﬁnite useful economic life.

13. Goodwill and impairment
Details of goodwill allocated to cash generating units for which the amount of goodwill so allocated is
signiﬁcant in comparison to total goodwill is as follows:

Electronic division
Asset protection division

Goodwill
carrying amount

2007
»’000
5,871
961

6,832

2006
»’000
5,871
961

6,832

The recoverable amounts of all the above CGUs have been determined from value in use calculations based on
cash ﬂow projections from formally approved budgets covering a ﬁve year period to 30 April 2012. The discount
rate which was applied was 11.8 per cent., the estimated weighted average cost of capital.

The trading companies all operate in certain niche markets, each of which can be in part project driven.
Therefore the budgets produced take known future projects into account, and allow for historic projects as
well. Within the electronic division, market share is assumed to remain unchanged except for these known
projects. In the asset protection division, there is a range of products and different assumptions have been
made about possibilities of growth for each of these products. Operating margins have been based on historic
ﬁgures for each product range and overheads, mainly salaries, are expected to increase in line with inﬂation.

The reviews which are carried out at 30 April each year indicated that no impairment provision was necessary.

Newmark Security PLC
36

14. Subsidiaries
The principal subsidiaries of Newmark Security PLC, all of which have been included in these consolidated
ﬁnancial statements, are as follows:

Name
Newmark Technology Limited(2a)
Newmark Technology (C-Cure Division) Limited
Newmark Technology S.A.
Safetell International Limited
Safetell Limited(2b)
Safetell Security Screens Limited(2b)
Newmark Technology Inc.
Vema B.V.
Vema N.V.(2c)
Vema UK Limited(2d)
Grosvenor Technology Limited
Newmark Group Limited
Sateon Limited

Country of
incorporation
Great Britain
Great Britain
Belgium
Great Britain
Great Britain
Great Britain
USA
The Netherlands
The Netherlands
Great Britain
Great Britain
Great Britain
Great Britain

(1)
(2)

The shares held in all companies are ordinary shares
The investments in subsidiary companies are held directly by the Company apart from the following:
(a)
(b)
(c)
(d)

Owned by Grosvenor Technology Limited
Owned by Safetell International Limited
Owned by Vema BV 51 per cent., Newmark Security PLC 47 per cent.
Owned by Vema NV

15.

Inventories

Raw materials and consumables
Work-in-progress
Finished goods and goods for resale

Proportion of
ownership

interest(1) Activity
Trading
Dormant
Dormant
Holding
Trading
Trading
Dormant
Holding
Property
Finance
Trading
Dormant
Dormant

100%
100%
100%
100%
100%
100%
100%
100%
98%
100%
100%
100%
100%

2007
»’000
740
178
463

1,381

2006
»’000
728
154
374

1,256

Finished goods include an amount of £Nil (2006: £Nil) carried at fair value less costs to sell. The value of stocks
consumed in the year was £4,835,000 (2006: £4,088,000). The amount of stock write downs in the year was
£19,000 (2006: £Nil). There are no stocks recoverable after 12 months (2006: £Nil).

16.

Trade and other receivables

Trade receivables (net)
Other receivables
Accrued income
Prepayments

17.

Trade and other payables ç current

Trade payables
Other tax and social security taxes
Other payables
Deferred income
Accruals

Newmark Security PLC
37

2007
»’000
2,651
80
228
237

3,196

2007
»’000
1,205
294
631
572
471

3,173

2006
»’000
2,009
74
223
20

2,326

2006
»’000
949
340
428
466
425

2,608

18. Other short term borrowings

Bank loans
— secured
Mortgage loan-secured
Finance lease creditor (note 27)
Loan notes
Deferred consideration loan notes

2007
»’000

250
10
109
—
3,561

3,930

2006
»’000

—
10
113
1,500
—

1,623

UK subsidiaries of the group use the same principal banker. The Group has entered into a netting arrangement
with the bank which enables group companies with bank accounts in surplus to be offset against overdrawn
amounts of other group companies, with a Group overdraft facility.

The bank loan is secured on the assets of the UK subsidiary companies and is repayable by equal monthly
instalments until July 2009. Interest is payable at 2 per cent. above base rate.

The mortgage loan is secured on a freehold property in Holland.

The loan notes issued by the Company were settled on 24 July 2006, and interest had been payable at 6 per
cent. per annum thereon.

The deferred consideration loan notes were issued in Euros, are unsecured and not repayable in cash before
1 November 2007. Interest is payable at 1ˇ/4 per cent. below base rate.

Information about fair values on the ﬁnancial liabilities is given in note 22.

19.

Long term borrowings

Bank loans — secured (note 18)
Mortgage loan-secured (note 18)
Finance lease creditor (note 27)

20. Non-current other creditors

Contingent consideration

2007
»’000
313
182
58

553

2007
»’000
—

2006
»’000
—
187
114

301

2006
»’000
3,369

Other creditors at 30 April 2006 comprised the fair value of the contingent consideration payable related to the
acquisition of Grosvenor Technology Limited, which was taken to be the estimated amount of cash value
discounted to its present value. Settlement by way of loan notes was made in the year.

Financial instruments ç Risk Management

21.
The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s
ﬁnancial performance.

The Group’s ﬁnancial
instruments comprise cash and liquid resources, and various items such as trade
receivables and payables that arise directly from its operations. The Group is exposed through its operations to
one or more of the following ﬁnancial risks:

Fair value or cash ﬂow interest rate risk

Foreign currency risk

Liquidity risk

Credit risk

Newmark Security PLC
38

The Board identiﬁes and evaluates ﬁnancial risks in conjunction with the Group’s operating companies and the
policy for managing these risks is set by the Board following recommendations from the Finance Director.
Certain risks are managed centrally, while others are managed locally following guidelines communicated from
the centre. The policy for each of the above risks is described in more detail below, with the accounting policies
as set out in Note 1.

Fair value and cash ﬂow interest rate risk
External group borrowings (excluding ﬁnance lease payables) are managed centrally and operating companies
are not permitted to borrow long term from external sources locally. Although the Board accepts that this
neither protects the Group entirely from the risk of paying rates in excess of current market rates nor
eliminates fully cash ﬂow risk associated with interest payments, it considers that it achieves an appropriate
balance of exposure to these risks.

Foreign currency risk
Foreign exchange risk arises when individual Group operations enter into transactions denominated in a
currency other than their functional currency. Where it is considered that the risk to the Group is signiﬁcant,
a matching forward contract will be entered into with a reputable bank.

Liquidity risk
The liquidity risk of each group entity is managed centrally and the Group maintains a draw down facility with
a major banking corporation to manage any unexpected short-term cash shortfalls.

Credit risk
The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally, to assess the
credit risk of new customers before entering contracts. The maximum exposure to credit risk is represented by
the carrying amount of each ﬁnancial asset in the balance sheet. Cash deposits are made with reputable high
street banks.

Financial assets and liabilities ç Numerical information

22.
Maturity of ﬁnancial liabilities

The carrying amounts of ﬁnancial liabilities, all of which are exposed to cash ﬂow or fair value interest rate risk,
are repayable as follows:

In less than one year
In more than one year but not more than two years
In more than two years but not more than three years
In more than three years but not more than four years
In more than four years but not more than ﬁve years
In more than ﬁve years

2007
»’000
3,930
311
80
10
10
142

4,483

2006
»’000
1,623
99
34
10
10
148

1,924

Borrowing facilities
The Group has undrawn committed borrowing facilities available at 30 April 2007 in which all conditions have
been met.

Expiry within 1 year

Floating
rate
»’000
2,448

Fixed rate
»’000
—

2007
Total
»’000
2,448

2006
Total
»’000
1,242

Newmark Security PLC
39

Interest rate risk
The currency and interest proﬁle of the Group’s ﬁnancial assets and liabilities after taking account of interest
rate swaps are as follows:

Sterling
Euro

Sterling

Floating
rate
liabilities
2007
»’000
563
3,561

Fixed rate
liabilities
2007
»’000
167
192

4,124

359

Floating
rate
liabilities
2006
»’000
—
—

Fixed rate
liabilities
2006
»’000
1,727
197

Interest
free
liabilities
2007
»’000
—
—

Interest
free
liabilities
2006
»’000
—
—

—

1,924

—

Floating
rate
assets
2007
»’000
1,948

Floating
rate
assets
2006
»’000
1,373

Fixed rate
assets
2007
»’000
—

Fixed rate
assets
2006
»’000
—

Interest
free
assets
2007
»’000
—

Interest
free
assets
2006
»’000
—

Total
»’000
730
3,753

4,483

Total
»’000
1,727
197

1,924

Total
»’000
1,948

Total
»’000
1,373

The weighted average interest rate of ﬁxed rate liabilities and the weighted average period for which they are
ﬁxed is as follows:

Sterling
Euro

Rate
2007
%
4.0
6.1

5.1

Period
2007
Years
0.9
20.0

11.1

Rate
2006
%
6.1
6.1

6.1

Period
2006
Years
0.4
21.0

1.6

Newmark Security PLC
40

Fair values
The book value and fair value of ﬁnancial liabilities are as follows:

Bank loans
Mortgage loan
Finance lease creditor
Company loan notes
Deferred consideration loan notes

Book
value
2007
»’000
563
192
167
—
3,561

4,483

Fair
value
2007
»’000
517
118
157
—
3,561

4,353

Book
value
2006
»’000
—
197
227
1,500
—

1,924

Fair
value
2006
»’000
—
108
211
1,478
—

1,797

Fair values of ﬁnancial liabilities have been determined by discounting cash payments at prevailing market rates
of interest having regard to the speciﬁc risks attaching to them.

The fair values of all other monetary assets and liabilities at 30 April 2006 and 2007 is equal to their book value.

23. Provisions

At 1 May 2006

Released in year

At 30 April 2007

Due within one year or less
Due after more than one year

Rental
provision
contracts
»’000
104

Leasehold
dilapidations
»’000
84

Warranty
»’000
20

Holiday
pay
»’000
77

(16)

16
72

—

—
84

—

20
—

—

77
—

Total
»’000
285

(16)

269

113
156

269

The rental provision related to the excess of Safetell’s contractual legal obligation at date of acquisition over the
market rental, and will be reversed over the remaining six years of the lease.

Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the
end of the lease in accordance with the lease terms. On recognition of the initial provision, an equal amount
was recognised as part of the cost of the leasehold improvements. This cost is recognised as depreciation of
leasehold improvements over the remaining term of the lease. The main uncertainty relates to estimating the
cost that will be incurred at the end of the lease.

24. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 30 per
cent. (2006: 30 per cent.).

The movement on the deferred tax account is as shown below:

(Asset)/liability
At 1 May
Income statement

At 30 April

Group

2007

2006

(116)
79

(37)

(115)
(1)

(116)

Deferred tax assets have been recognised in respect of all temporary timing differences giving rise to deferred
tax assets because it is probable that these assets will be recovered.

Newmark Security PLC
41

The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same
jurisdiction as permitted by IAS12) during the period are shown below.

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is
an intention to settle the balances net.

Details of the deferred tax liability, and amounts charged/(credited) to the consolidated income statement and
amounts charged/(credited) to reserves are as follows:

(Asset)/
Liability
2007
»’000
(42)
75
(70)

Charged/
(credited)
to income
2007
»’000
(12)
91
—

(37)

(Asset)/
Liability
2006
»’000
(30)
(16)
(70)

(116)

Charged/
(credited)
to income
2006
»’000
(13)
7
—

(6)

2007
»’000
967

2006
»’000
1,022

Accelerated capital allowances
Other temporary and deductible differences
Available losses

A deferred tax asset has not been recognised for the following:

Unused tax losses

25. Share capital

Ordinary shares of 1p each

Ordinary shares of 1p each
At beginning of the year
Other issues

2007
Number
1,015,164,192

Authorised

2007
»
10,151,642

2006
Number
1,015,164,192

2007
Number

Issued and fully paid

2007
»

2006
Number

373,957,816
75,000,000

3,739,578
750,000

361,755,016
12,202,800

2006
»
10,151,642

2006
»

3,617,550
122,028

3,739,578

At end of the year

448,957,816

4,489,578

373,957,816

Newmark Security PLC
42

26. Reserves

At 1 May 2005
Proceeds on share issue
Translation differences on overseas
operations
Share-based payment provision
Proﬁt for the year

At 30 April 2006

At 30 April 2006
Translation differences
on overseas operations
Share-based payments provision
Proﬁt for the year
Reclassiﬁcation between reserves

Share
premium
»’000
432
61

Merger
reserve
»’000
801
—

Retained
earnings
»’000
(2,271)
—

Foreign
exchange
reserve
»’000
—
—

Warrant
reserve
»’000
646
—

—
—
—

493

—
—
—
—

—
—
—

801

—
—
—
—

—
21
389

(1,861)

—
38
1,089
134

(600)

(39)
—
—

(39)

1
—
—
—

(38)

—
—
(398)

248

—
—
(114)
(134)

—

At 30 April 2007

493

801

The share premium account represents the excess of the market value of shares issued over the nominal value
of those shares, less expenses.

The merger reserve arose in the year ended 30 April 2003 when the Company made an offer to the Global
Depository Receipt (‘‘GDR’’) holders of Vema N.V. for the 49 per cent. of the issued share capital of that
company not already owned by the Group. The offer represents 1.5 Newmark shares for each GDR and the
merger reserve represented the excess of market value over nominal value of the shares issued.

Retained earnings represents the cumulative amount of retained proﬁts/losses each year as reported in the
income statement, plus the exchange differences on the retranslation of foreign operations up to 1 May 2005
(the date of transition to IFRS).

Foreign exchange reserve represents the cumulative exchange differences on the retranslation of foreign
operations from 1 May 2005.

The warrant reserve arose from the valuation of warrants attached to loan notes issued by the Company as
adjusted by the subsequent revaluations of those loan notes at 30 April 2006 and at exercise date.

Leases

27.
Finance leases
Future lease payments are due as follows:

Not later than one year
Later than one year and not later than ﬁve years

Newmark Security PLC
43

Minimum
lease
payments
2007
»’000
119
65

Interest
2007
»’000
10
7

184

Minimum
lease
payments
2006
»’000
124
128

Interest
2006
»’000
11
14

252

Present
value
2007
»’000
109
58

167

Present
value
2006
»’000
113
114

227

The present value of future lease payments are analysed as:

Current liabilities
Non-current liabilities

2007
»’000
109
58

167

2006
»’000
113
114

227

Operating leases — lessee
The Group leases the majority of its properties. The terms of property leases vary, although they all tend to be
tenant repairing with rent reviews every 2 to 5 years.

Commitments under non-cancellable operating leases expiring:

Not later than one year
Later than one year and not later than ﬁve years
Later than ﬁve years

2007
»’000
7
91
815

913

2006
»’000
6
135
963

1,104

Share-based payment

28
The Group has operated two share option schemes, a HM Custom & Revenue Approved Share Option Scheme
and an Unapproved Share Option Scheme. The schemes require that exercise of options be subject to the
satisfaction of certain performance criteria. Rights over share options will be forfeited after leaving the
Group’s employment.

The total number of share options outstanding under the Approved and Unapproved Share Option Schemes
were:

Date of Grant
October 1997
January 1999
December 2001
September 2002
October 2005

Total

Subscription
Price payable
14.5p
8.25p
5p
2p
1.5p

2007
Approved
28,000
250,000
125,000
125,000
7,000,000

2006
Unapproved
28,000
250,000
125,000
6,075,000
7,000,000

2007
Approved
28,000
250,000
125,000
125,000
7,000,000

2006
Unapproved
28,000
250,000
125,000
6,075,000
7,000,000

7,528,000 13,478,000

The options may be exercised within 10 years from the date of issue.

The remaining weighted average contractual lives for Approved and Unapproved Options were 8.1 and 6.9 years
respectively (2006: 9.1 and 7.9).

Of the total number of options outstanding at the end of the year 528,000 Approved and 6,478,000
Unapproved (2006: same) had vested at the end of the year.

There were no options granted or exercised during the year.

The following information is relevant in the determination of the fair value of options granted during the year
under the equity settled share-based remuneration schemes operated by the Group.

Option pricing model used: Binomial option pricing model
Share price at grant date: 1.36p
Exercise price: 1.5p
Estimated period to exercise of options: 10 years
Expected volatility: 69 per cent.
Risk-free interest rate: 4.23 per cent.
Dividends: nil

The volatility assumption was based on a statistical analysis of daily share prices over a period of 5 years.

Newmark Security PLC
44

The share based remuneration expense for equity settled schemes was £38,000 (2006: £21,000).

29. Related party transactions
Details of directors’ remuneration are given in the Remuneration Report on page 13.

The Group has not made any provision for bad or doubtful receivables in respect of related party debtors nor
has any guarantee been given or received during 2007 or 2006 regarding related party transactions.

30. Notes supporting cash £ow statement
Cash and cash equivalents comprises:

Cash available on demand

Net cash increase/(decrease) in cash and cash equivalents
Changes in foreign exchange rates
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Signiﬁcant non-cash transactions are as follows:
Financing activities
Proceeds from ﬁnance lease creditor
Debt converted into equity
Share issues to settle expenses

2007
»’000
1,948

575
—
1,373

1,948

94
750
—

844

2006
»’000
1,373

(1,802)
—
3,175

1,373

140
—
184

324

Newmark Security PLC
45

2007
»’000

16,587
6

16,593

2006
»’000

717
74

791

16
28

(12,816)

(11,598)

COMPANY BALANCE SHEET
COMPANY BALANCE SHEET
30 April 2007 ç UK GAAP Financial Statements

Note

2007
»’000

Fixed assets
Investment in subsidiary
Tangible assets

Current assets
Debtors
Cash at bank and in hand

Creditors: amounts falling due within one

year

Net current liabilities

Total assets less current liabilities
Creditors: amounts falling due after more

than one year

Accruals and deferred income

Net assets

Capital and reserves
Called up share capital
Share premium account
Merger reserve
Proﬁt and loss account

3
4

8
9
9
9

(12,772)

3,821

(313)
(108)

3,400

4,490
493
801
(2,384)

3,400

2006
»’000

16,587
—

16,587

(10,807)

5,780

(3,369)
(201)

2,210

3,740
493
801
(2,824)

2,210

Shareholder’s funds-Equity

The notes of pages 47 to 50 from part of these ﬁnancial statements.

These ﬁnancial statements were approved by the Board of Directors and authorised for issue on 16 July 2007.

M Dwek
Director

Newmark Security PLC
46

NOTES FORMING PART OF THE FINANCIAL STATEMENTS
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
for the year ended 30 April 2007

Accounting policies

1.
The ﬁnancial statements have been prepared in accordance with applicable accounting standards in the United
Kingdom and under the historical cost convention. The accounts have been prepared on the going concern
basis.

The following principal accounting policies have been applied consistently in dealing with items which are
considered material in relation to the Company’s ﬁnancial statements.

Proﬁt and Loss Account
Under Section 230(4) of the Companies Act 1985 the Company is exempt from the requirement to present its
own proﬁt and loss account. The loss for the year ended 30 April 2007 is disclosed in note 10. The charge for
taxation is based on the loss for the year and takes into account taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting purposes.

Depreciation
Depreciation is provided to write off the cost, less estimated residual values, of all ﬁxed assets evenly over their
expected useful lives. It is calculated at the following rates:

Computer equipment
Fixtures and ﬁttings

— 33 1/3 per cent. per annum straight line
— 15 per cent. per annum straight line

Valuation of investments
Investments held as ﬁxed assets are stated at cost less any provision for impairment.

Deferred taxation
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed
by the balance sheet date except that the recognition of deferred tax assets is limited to the extent that the
company anticipates to make sufﬁcient taxable proﬁts in the future to absorb the reversal of the underlying
timing differences.

Deferred tax balances are not discounted.

Leased assets
Operating lease rentals are charged to the proﬁt and loss account on a straight-line basis over the term of the
lease.

Employees and staff costs

The average number of employees, including directors, during the period was:
Ofﬁce and management

Staff costs (including Executive Director) comprise:
Wages and salaries
Employer’s national insurance contributions and similar taxes

2007
Number

2006
Number

2007
»’000

2006
»’000

123
14

137

117
13

130

Newmark Security PLC
47

Investment in subsidiary

Cost
At 30 April 2006 and 2007

Net book value 30 April 2006 and 2007

The subsidiaries of Newmark Security PLC, are as follows:

Name
Newmark Technology (C-Cure Division) Limited
Vema B.V.
Newmark Technology S.A.
Safetell International Limited
Newmark Technology Inc.
Grosvenor Technology Limited
Newmark Group Limited
Sateon Limited

Tangible assets

»’000

16,587

Proportion of
ownership
interest
100%
100%
100%
100%
100%
100%
100%
100%

Country of
incorporation
Great Britain
The Netherlands
Belgium
Great Britain
USA
Great Britain
Great Britain
Great Britain

Computers
Fixtures
& Fittings
»’000

Total
»’000

23
7
(23)

23
1
(23)

—

23
7
(23)

23
1
(23)

—

2007
»’000
6
10
—

2006
»’000
14
78
625

717

Cost
At 1 May 2006
Additions
Disposals

At 30 April 2007

Depreciation
At 1 May 2006
Charge for the year
Eliminated in respect of
Disposals
At 30 April 2007

Net book value
At 30 April 2007

At 30 April 2006

Debtors

Other debtors
Prepayments
Amount due from group undertaking

All amounts shown under debtors fall due for payment within one year.

Newmark Security PLC
48

Creditors: amounts falling due within one year

Loan (note below)
Loan notes
Deferred consideration loan notes (note below)
Amount due to group undertakings
Other taxation and social security

2007
»’000
250
—
3,611
8,950
5

12,816

2006
»’000
—
1,500
2
10,090
6

11,598

The loan is repayable by equal monthly instalments, and is secured on the assets of the Group. Interest is
payable at 2 per cent. above base rate.

The loan notes issued by the Company were settled on 24 July 2006, and interest had been payable at 6 per
cent. per annum thereon.

The deferred consideration loan notes are denominated in Euros and derive from the contingent consideration
payable on the acquisition of Grosvenor Technology Limited. The loan notes are unsecured and payable in cash
on 1 November 2007 at the earliest. Interest is payable at 1ˇ/4 per cent. below base rate.

Creditors: amounts falling due after more than one year

Loan (see note 6)
Other creditors

2007
»’000
313
—

313

2006
»’000
—
3,369

3,369

Other creditors at April 2006 comprised the fair value of the contingent consideration payable related to the
acquisition of Grosvenor Technology Limited, which was taken to be the estimated amount of cash value
discounted to its present value. Settlement by way of loan notes was made in the year.

Share capital

Authorised:
1,015,164,192 Ordinary shares of 1p each
(2006: 1,015,164,192)

Allotted, called up and fully paid:
448,957,816 Ordinary shares of 1p each
(2006: 373,957,816)

Reserves

At 1 May 2006
Retained proﬁt for the year

At 30 April 2007

2007
»

2006
»

10,151,642 10,151,642

4,489,578

3,739,578

Share
premium
account
»’000
493
—

Merger
reserve
»’000
801
—

Pro¢t and
loss
account
»’000
(2,824)
440

493

801

(2,384)

Newmark Security PLC
49

10. Reconciliation of movements in shareholder’s funds

Opening shareholder’s funds
Loss for the year
New share capital subscribed

Closing shareholder’s funds

2007
»’000
2,210
440
750

3,400

2006
»’000
2,067
(41)
184

2,210

Financial commitments

11.
There was a ﬁxed and ﬂoating charge over the assets of the company in favour of the holder of Loan Notes
issued by the parent undertaking, Newmark Security PLC on 24 July 2003. As at 30 April 2007 loan notes in the
sum of £Nil were in issue (2006: £1,500,000), the loan notes having been settled in the year.

12. Commitments under operating leases
At 30 April 2007 the company had annual commitments under non-cancellable operating leases as follows:

Expiring within one year

2007
Land and
buildings
»’000
27

2006
Land and
buildings
»’000
27

Newmark Security PLC
50

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of Newmark Security PLC will be held at 57 Grosvenor
Street, London W1K 3JA on 10 September 2007 at 12.00 noon for the following purposes:

ORDINARY BUSINESS
1.

To receive and adopt the ﬁnancial statements and reports of the Directors and auditors for the ﬁnancial
period ended 30 April 2007.

To re-appoint Maurice Dwek as a director of the Company, who retires in accordance with the Company’s
Articles of Association and offers himself for re-appointment.

To re-appoint BDO Stoy Hayward LLP as the auditors of the Company until the next Annual General
Meeting and to authorise the Directors to ﬁx their remuneration.

To approve the adoption of the Newmark Security PLC EMI Share Option Plan (‘‘the Scheme’’) constituted
by the rules produced in draft to this meeting and signed by the Chairman for the purposes of
identiﬁcation (the principal terms of which are summarised in Appendix 1 to this Notice) be approved;
and that the Directors be authorised to adopt the rules (subject to such modiﬁcations as the Directors
may consider necessary or desirable) and do all acts and things necessary or expedient to operate the
Scheme.

SPECIAL BUSINESS
5.

if thought ﬁt, to pass the following Resolution as an Ordinary Resolution: That the
To consider and,
Directors be and they are hereby generally and unconditionally authorised in accordance with section 80
of the Companies Act 1985 (the ‘‘Act’’) to allot relevant securities (as deﬁned in that section) up to a
maximum aggregate nominal amount of relevant securities of £1,496,526; and this authority will (unless
renewed) expire at the conclusion of the next Annual General Meeting of the Company but the Company
may, before this authority expires, make an offer or agreement which would or might require relevant
securities to be allotted after the authority expires and the Directors may allot relevant securities
pursuant to such offer or agreement as if the authority conferred hereby had not expired.

To consider and, if thought ﬁt, to pass the following Resolution as a Special Resolution: That, subject to
the passing of the previous resolution, the Directors be and they are hereby empowered pursuant to
section 95 of the Act to allot equity securities (within the meaning of section 94 of the Act) for cash
pursuant to the authority conferred by Resolution 4 above as if section 89(1) of the Act did not apply
to any such allotment provided that this power shall be limited to:

(a)

the allotment of equity securities in connection with an issue in favour of the holders of ordinary
shares of the Company in proportion (as nearly as may be) to their respective holdings of ordinary
shares, subject only to exclusions or other arrangements which the Directors may deem necessary or
expedient to deal with fractional entitlements, legal or practical problems arising in any overseas
territory or the requirements of any regulatory body or stock exchange in any territory; and

(b)

the allotment otherwise than pursuant to sub-paragraph (a) above of equity securities up to an
aggregate nominal amount of £897,916,

and the power hereby granted shall expire at the conclusion of the next Annual General Meeting of the
Company save that the Company may before such expiry make an offer or agreement which would or
might require equity securities to be allotted after such expiry but otherwise in accordance with the
foregoing provisions of this power in which case the Directors may allot equity securities in pursuance
of such offer or agreement as if the power conferred hereby had not expired.

By order of the Board
B G Beecraft
Company Secretary

16 July 2007
Registered Ofﬁce
57 Grosvenor Street
London W1K 3JA

Notes:
1.

A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and, on a poll, vote instead of him. A proxy
need not be a member of the Company.
To be effective, completed forms of proxy and the power of attorney or other authority (if any) under which they are signed or a copy of that
power or authority certiﬁed notarially or in accordance with the Powers of Attorney Act 1971 must be lodged in accordance with the
instructions printed thereon, not later than 48 hours before the time appointed for the meeting or any adjourned meeting.

Newmark Security PLC
51

The following documents are available for inspection at the Company’s registered ofﬁce during normal business hours on any weekday
(excluding Saturdays, Sundays and public holidays) until 7 September 2007 and will also be available for inspection at the place of the
annual general meeting for at least 15 minutes prior to and until the conclusion of the meeting:
(a)

a register in which are recorded details of all transactions in the shares of the Company in respect of all Directors and their families;
and
a copy of every service contract between the Company and any Director of the Company.

(b)
Completion and return of a form of proxy will not preclude a member from attending and voting at the meeting in person should he wish to
do so.
The Company, pursuant to Regulation 41 of the Uncertiﬁcated Securities Regulations 2001, speciﬁes that only those members registered in
the register of members of the Company 48 hours before the time of the meeting shall be entitled to attend and vote at this meeting in
respect of the number of shares registered in their name at that time. Changes to entries in the register of members after that time shall be
disregarded in determining the rights of any person to attend or vote at this meeting.
In the case of joint holders the vote of the senior who tenders a vote whether in person or by proxy will be accepted to the exclusion of the
votes of the other joint holders and for this purpose seniority will be determined by the order in which the names stand in the register of
members of the Company in respect of the relevant joint holding.
Directors authority to allot shares.
Under Section 80 of the Companies Act 1985, the Directors may not exercise any powers of the Company to allot relevant securities (as
deﬁned in that section) unless authorised to do so by the Company in general meeting or by its articles. Resolution 4 authorises allotment
sufﬁcient to cover the allotment of up to an amount approximately equal to (but not exceeding) one third of the issued share capital of the
Company for the period to the conclusion of the Annual General Meeting in 2008. It replaces all previous authorities and is in line with the
institutional guidelines followed by other publicly listed companies.
Partial exclusion of pre-emption rights
Section 89 of the Companies Act 1985 requires that a public company allotting shares for cash must ﬁrst offer them to existing shareholders
following a statutory procedure which is both costly and cumbersome. Resolution 5 enables the Directors to allot a number of shares equal
to twenty per cent. of the ordinary share capital of the Company in issue. It replaces all previous such powers.
The taking of powers of this sort is reasonably standard practice for public companies and the Directors believe that the limited powers
provided by this resolution will maintain a desirable degree of ﬂexibility. Unless previously revoked or varied the disapplication will expire
on the conclusion of the next Annual General Meeting of the Company.

Newmark Security PLC
52

APPENDIX 1

Newmark Security PLC EMI Share Option Plan (‘‘the Scheme’’)
The Scheme is a share option scheme, pursuant to which employees and directors may be granted options to
acquire shares in the Company (‘‘Options’’). It is proposed that tax efﬁcient Options be granted under the
Scheme (‘‘EMI Options’’). There are individual limits on the value of shares in the Company that can be subject
to EMI Options. Therefore, it is also possible to grant Options under the Scheme on a non-tax efﬁcient basis
(‘‘Unapproved Options’’). It is proposed that the Company will adopt the Scheme and grant Options after the
resolution to approve the Scheme is passed by shareholders. The Scheme will be administered by the
Remuneration Committee.

The headline features of the Scheme may be summarised as follows:

Eligibility
including executive directors, of the Company will be eligible to be granted Options. EMI
Any employees,
Options can be granted provided that the employees or directors meet the requirement as to commitment of
working time, being at least 25 hours per week or, if less, 75 per cent. of working time. Any individual holding a
‘‘material interest’’ (being 30 per cent. or more) in the shares in the Company will be precluded from receiving
an EMI Option. Where the employee or director cannot receive an EMI Option, an Unapproved Option may be
granted instead.

Options cannot be granted to individuals who are not employees or directors.

Grant of Options
The Remuneration Committee may at its discretion grant Options under the Scheme to selected employees and
executive directors.

The Remuneration Committee will determine the price at which shares in the Company may be acquired on the
exercise of an Option (‘‘the Exercise Price’’) which price will be the higher of nominal value and market value at
the date of grant. Market value means the price agreed with the HM Revenue and Customs, but will generally
be the closing middle market quotation of an Ordinary Share as derived from the London Stock Exchange for
the immediately preceding dealing day.

Limits
Ordinary Shares acquired under the Scheme may be either newly issued or purchased on the market. Grants of
options to subscribe for Ordinary Shares under the Scheme or any other employee share scheme within any ten
year rolling period may not exceed an overall limit of 10 per cent. of the issued share capital of the Company.

Vesting of EMI and Unapproved Options
EMI and Unapproved Options will vest (to the extent they have not already lapsed) and become exercisable on
the earliest of the following events:

(i)

(ii)

(iii)

(iv)

3 years after the date of grant or such other period, dates or events speciﬁed by the Remuneration
Committee;

upon a change in control of the company, but excluding a reorganisation whereby a new holding
company acquires the Company by way of share exchange where there is identity, or substantial
identity, of the holders of Shares before, and of shares of the new holding company after, such share
exchange;

the death of the employee; or

the cessation of employment of the Participant by reason of a deﬁned Good Leaver provision.

Cessation of employment
An Option held by an Option holder who ceases employment with the Company or its group for any reason
other than death, or a deﬁned Good Leaver provision, will
lapse in full on the date of such cessation of
employment. For these purposes a Good Leaver is deﬁned as an employee who ceases to be employed by
reason of:

(i)

injury or disability (in each case as evidence to the satisfaction of the Board);

Newmark Security PLC
53

(ii)

(iii)

(iv)

(v)

being a female employee who is absent from work by reason of pregnancy or conﬁnement, when she
ceases to be entitled to exercise her right to return to work under the Employment Rights Act 1996;

the company by which he is employed or engaged leaving the Group;

the transfer or sale of the undertaking or part-undertaking in which the Participant is employed and by
virtue of which he is an Eligible Employee to a person other than a member of the Group; or

by reason of the termination of his employment by his employing company in circumstances other than
those stated above and not involving misconduct or impropriety on his part (in relation to which the
determination of the Board in any case shall be conclusive).

If an Option holder ceases to be employed by the Company or its group by reason of a Good Leaver provision
then the Option will vest and become exercisable in full on the date of such cessation of employment,
irrespective of the attainment of a performance condition. In this scenario the option holder will have a given
period (six months, or twelve months in the case of cessation by reason of death) within which to exercise the
Option.

Takeover
In the event of a change of control of the Company, liquidation or similar corporate event, the Options will vest
in full and become exercisable irrespective of the performance conditions (save in the event that a change of
control is effected on the voluntary winding-up of the company in which case both the initial holding period
and performance conditions must have been satisﬁed). If another company obtains control of the Company in
certain circumstances, existing Options may be exchanged for new options over shares in the acquiring
company, if it so agrees. New options must be broadly equivalent to the original Options.

Exercise of Options
Options will be exercisable on payment of the Exercise Price and any liability arising to income tax and National
Insurance. The rules are drafted to allow the Company’s employer’s National Insurance liability to be passed on
to the employees.

In the event of the Scheme no longer qualifying under the EMI legislation (i.e. due to the occurrence of a
‘‘disqualifying event’’ relating to the Company), the EMI Options may be exercised at the discretion of the
Remuneration Committee within a period of 40 days following the event. Alternatively the EMI Options will
continue to subsist under the Scheme but the beneﬁcial tax treatment will be reduced.

In any event, unexercised Options under the Scheme will lapse on the tenth anniversary of the date of grant.

Performance Conditions
The exercise of an Option may be made subject to the achievement of a speciﬁc performance condition, as
determined by the Remuneration Committee. If events occur which cause the Remuneration Committee to
consider that any existing performance conditions have become unfair or impractical, they will retain
discretion to relax, amend or waive such conditions.

Issue of Ordinary Shares
Ordinary Shares acquired under the Scheme will rank pari passu with Ordinary Shares in issue. Participants will
be entitled to dividends where the relevant record date falls after the exercise date. Where Ordinary Shares are
to be admitted to AIM, the Company will apply for admission of such Ordinary Shares.

Variations of Ordinary Share Capital
If the issued Ordinary Share capital of the Company is varied on a capitalisation, consolidation or reduction of
capital or a rights issue or other variation in the share capital, on the advice of the auditors and with the
approval of HM Revenue and Customs where necessary, the Exercise Price or the number of Ordinary Shares
comprised in an Option may be adjusted.

No such adjustment may reduce the Exercise Price per Ordinary Share for Options where Ordinary Shares are to
be allotted under the Scheme below its nominal value unless the Remuneration Committee is authorised to
capitalise from reserves a sum equal to the excess.

Newmark Security PLC
54

Rights Not Pensionable
Rights and beneﬁts conferred upon participating employees and executive directors under the Scheme will not
be taken into account for the purposes of determining remuneration for pension, bonus or proﬁt sharing
purposes, and shall not form part of the employee’s contract of employment.

Amendment/Administration
The Remuneration Committee may amend the Scheme as it in its discretion may determine.

Newmark Security PLC
55

greenaways. 172025